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Chapter 2 Accounting for Partnership Firms—Fundamentals 2.29
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22. From the following Balance Sheet of X and Y, calculate interest on capital @ 6% p.a. payable to Y for the year
ended 31st March, 2018:
Liabilities ` Assets `

X’s Capital A/c 50,000 Sundry Assets 1,10,000
Y’s Capital A/c 40,000
Contingency Reserve (transferred in 2017–18) 20,000
1,10,000 1,10,000
During the year, Y’s drawings were ` 15,000 and profit for the year ended 31st March, 2018 was ` 30,000.
[Ans.: Interest on Y’s Capital—` 3,000.]
23. P, Q and R were partners in a firm sharing profits in the ratio of 1 : 2 : 2. After division of the profit for the
year ended 31st March, 2018, their capitals were: P ` 1,50,000; Q ` 1,80,000 and R ` 2,10,000. During the year,
they withdrew ` 20,000 each. The profit for the year was ` 60,000. The Partnership Deed provided that the
interest on capital will be allowed @ 10% p.a. While preparing final accounts, interest on partners’ capitals
was not allowed.
You are required to calculate capital of P, Q and R as at 1st April, 2017 and pass necessary adjustment entry
for providing interest on capital. Show your working clearly. (Delhi 2002, Modified)
[Ans.: Opening Capitals: P ` 1,58,000; Q ` 1,76,000; R ` 2,06,000;
Debit Q with ` 4,000; R with ` 1,000 and Credit P with ` 5,000.]
24. A, B and C were partners in a firm. On 1st April, 2017 their capitals stood at ` 50,000, ` 25,000 and
` 25,000 respectively. As per the provisions of the Partnership Deed:
(a) C was entitled for a salary of ` 1,500 per month.
(b) Partners were entitled to interest on capital @ 5% p.a.
(c) Profits were to be shared in the ratio of capitals.
The net profit for the year ended 31st March, 2018 of ` 45,000 was divided equally without providing for
the above terms.
Pass an adjustment entry to rectify the above error.
[Ans.: A’s Capital A/c (Dr.) ` 1,500; B’s Capital A/c (Dr.) ` 8,250; C’s Capital A/c (Cr.)—` 9,750.]
25. A, B and C entered into partnership on 1st April, 2009 to share profits and losses in the ratio of 5 : 3 : 2.
A guaranteed that C’s share of profit, after charging interest on capital @ 5% p.a., would not be less than
` 15,000 in any year.
The capitals were as follows: A—` 1,60,000; B—` 1,00,000 and C—` 80,000.
Profit for the year ended 31st March, 2018 amounted to ` 79,500 before providing for interest on capital.
Show Profit and Loss Appropriation Account. [Ans.: Share of Profit: A—` 28,750; B—` 18,750; C—` 15,000.]
26. After the accounts of a partnership have been drawn up and the books closed, it is discovered that interest on
capitals for the year 2016–17 and 2017–18 has been credited to partners though there is no such provision
in the Partnership Deed. The amounts involved are:
Partners Interest Credited
2016–17 (`) 2017–18 (`)
A 350 360
B 200 210
C 110 110
You are required to put through adjustment entries as on 1st April, 2018, if the profits were shared
as follows:
2016–17—1 : 1 : 1; 2017–18—3 : 4 : 3
It may be assumed that capitals are fixed.