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2.22 Double Entry Book Keeping—CBSE XII

Dr. PARTNERS’ CURRENT ACCOUNTS Cr.
Particulars A (`) B (`) C (`) Particulars A (`) B (`) C (`)
To Balance c/d 4,000 By Balance b/d 10,000 5,000
To Drawings A/c 72,000 48,000 48,000 By Partners’ Salary A/c 20,000 30,000
To Interest on By Interest on
Drawings A/c 3,300 2,200 2,200 Capital A/c 11,000 8,750 4,500
To Balance c/d 38,600 67,450 35,750 By Profit and Loss
App. A/c 92,900 92,900 46,450
1,13,900 1,21,650 85,950 1,13,900 1,21,650 85,950

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars A (`) B (`) C (`) Particulars A (`) B (`) C (`)
To Bank A/c 10,000 By Balance b/d 1,00,000 80,000 50,000
To Balance c/d 1,20,000 95,000 40,000 By Bank A/c 20,000 15,000
1,20,000 95,000 50,000 1,20,000 95,000 50,000
Illustration 16 (When Partnership Deed does not Exist).
Amit presents following Profit and Loss Appropria tion Account to his partner Bishan:

Dr. PROFIT AND LOSS APPROPRIATION ACCOUNT for the year ended 31st March, 2018 Cr.
Particulars ` Particulars `
To Amit’s Capital A/c—Salary 1,00,000 By Profit and Loss A/c (Net Profit) 2,94,000
To Bishan’s Capital A/c—Salary 70,000
To Interest on Capital @ 6% p.a.:
Amit on ` 5,00,000 30,000
Bishan on ` 2,00,000 12,000 42,000
To Interest on Amit’s Loan @ 6% p.a. 12,000
To Profit transferred to:
Amit’s Capital A/c (5/7 of ` 70,000) 50,000
Bishan’s Capital A/c (2/7 of ` 70,000) 20,000 70,000
2,94,000 2,94,000

Bishan is of the opinion that he has not been treated fairly. The partnership is not supported
by a Partnership Deed. Point out whether the Profit and Loss Appropriation Account prepared
by Amit is as per the provisions of the Indian Partnership Act, 1932.
You are required to redraw Profit and Loss Appropriation Account on the basis of the Provisions
of Indian Partnership Act, 1932.
Solution: The account presented by Amit is not correct because when Partnership Deed does
not exist, provisions of the Indian Partnership Act, 1932 apply. Therefore,
(i) Salary will not be paid to any of the partners.
(ii) Interest on capitals will not be allowed.
(iii) Both partners will share profit equally.
(iv) Interest charged on Amit’s Loan @ 6% p.a. is in order. Interest on such loan being a
charge against the profit, shall be transferred to the debit of the Profit and Loss Account
and not to the debit of the Profit and Loss Appropriation Account.