Page 26 - ISCDEBK-12

1.16 Double Entry Book Keeping (Section A)—ISC XII

Master Questions

Illustration 15.
Vivek, Naman and Akash started their partnership firm on 1st April, 2018 sharing profits and losses in the
ratio of 4 : 3 : 2. Their capital accounts are as follows since the firm was started:
Vivek—` 8,00,000, Naman—` 6,00,000, and Akash—` 4,00,000.
Balances in their Current Accounts in the beginning of the year were as follows:

Vivek—` 1,00,000, Naman—` 80,000, and Akash—` 60,000 (Debit).
The Partnership Deed provides as under:

(i) Vivek will get annual salary of ` 60,000; Naman will get monthly salary of ` 4,000, while Akash will get
commission @ 5% on net profit.
(ii) Interest on balances in current accounts will be charged/paid @ 10% p.a.
(iii) Interest on Capital will be allowed @ 6% p.a. whereas interest will be charged on drawings @ 10% p.a.

(iv) An amount equal to 10% of the net profit will be transferred to General Reserve.
(v) Interest on Loan to a partner will be charged at the rate of interest allowed on loan by the partner.
(vi) Akash was guaranteed minimum yearly profit of ` 2,00,000 by Vivek and Naman. Shortfall in share of profit
was to be borne by Vivek and Naman equally.

Additional Information:
(ii) Naman had advanced a loan of ` 1,00,000 to the firm on 1st September, 2019.
(ii) Advance was given to Akash of ` 1,00,000 on 1st October, 2019.

(iii) Vivek had allowed the firm to use his property for business for a monthly rent of ` 10,000 payable at the
end of the year.
(iv) Vivek withdrew ` 1,00,000 against capital on 1st December, 2019.
(v) Akash introduced further capital of ` 1,00,000 on 1st October, 2019.

(vi) Vivek withdrew regularly ` 5,000 per month in the beginning of each month; Naman withdrew regularly
` 5,000 per month in the middle of each month and Akash withdrew regularly ` 5,000 per month at the
end of each month.

(vii) Divisible profit of the last year amounting to ` 7,20,000 was distributed equally among the partners before
allowing interest on capital.

(viii) Profit for the year before the above adjustments was ` 12,60,000.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2020.