LOVELY PROFESSIONAL UNIVERSITY

HOME WORK: II

School: LSM
Department: Management
Name of the faculty member: Vivek Chaturvedi
Course No: COM104
Course Title: Financial Accounting-II
Class: B. Com Term: II Section: S1009 and S1013
Batch: 2010-2013
Max. Marks: 15 Date of Allotment: 18-01-11 Date
of Submission: 25-01-11

Part-A
1. Mohanesh and Suresh are partners in a firm sharing profits and losses as
Mohanesh- 80% and Suresh 20%. On 1st April 2002, the capital of the partners was:
Mohanesh Rs 50,000 and Suresh Rs 40,000. The Profit and Loss Account of the firm
for the year ended 31st March 2003 showed a net profit of Rs 175,000.

You are required to give the Profit and Loss Appropriation Account of the firm after
taking into consideration the following adjustments:

(i) Interest on capital at 5% per annum

(ii) Interest on Suresh Loan Account of Rs 50,000 for whole year

(iii)Interest on drawing of partner at 6% per annum; the drawings were- Rs

15,000 for Mohanesh and Rs 10,000 for Suresh.

(iv) Transfer 10% of the net profit of the firm before distribution to the reserve
fund.

2. A, B and C are partners in a firm. Following are their summarized capital accounts
:

Date Particular A B C Date Particulars A B C

s
31.12.20 To 12,0 12,0 12,0 1.1.2002 By Balance 20,0 30,0 40,0
02 Drawings 00 00 00 b/d 00 00 00
A/c
To 23,0 33,0 43,0 31.12.20 By Share of 15,0 15,0 15,0
Balance 00 00 00 02 Profit A/c 00 00 00
c/d
 35,0 45,0 55,0 35,0 45,0 55,0
00 00 00 00 00 00

On 1.1.2003, it is agreed that the following would be effective retrospectively

from 1.1.2002:

1) A shall be entitled to a salary of Rs 750 pm.

2) Interest shall be allowed on partner’s capital at 5% on the opening

balances.

3) Profits shall be shared in proportion to opening balance in capital accounts.

4) C’s share of profit exclusive of interest on capital shall not fall below Rs
15,000, the deficit, if any, being contributed by A out of his share.

You are required to show by a single journal entry to give effect to the above
arrangement.

3. A, B and C were in a partnership. A and B sharing profit in the ratio of three

is to one and C receiving a salary of Rs 25,000 plus 5% of the profit after
charging his salary and his 5% of the profit, or 1/7th of the profit of the firm
whichever is larger. Any excess of the latter over the former is, under the
partnership agreement, to be charged to A. The profit for the year ended 31 st
December, 2002 was Rs 287,000, after charging interest on capital and C’s
salary. You are required to show the distribution of the profit among the
partners.

Part-B
4. Mohan and Sohan are in partnership sharing profit and losses in the ratio of
3:2. As Mohan on account of his advancing years feels he cannot work hard
as before, the chief clerk of the firm Ratan is admitted as partner with effect
from 1st Jan, 2000 and becomes entitled to 1/10 of the net profits and
nothing else, the mutual ratio between Mohan and Sohan remaining
unaltered.

Before becoming a partner Ratan was getting a salary of Rs. 1500 P.M
together with a commission of 4% on the net profits after deducting his salary
and commission.

It is provided in the partnership deed that the share of Ratan’s profit as a

partner in excess of the amount to which he would have been entitled if he
had continued as the chief clerk should taken out of Mohan’s share of profits.
 The profits for the year ended 31st Dec.2000 amounted to Rs. 130000. Show
the distribution amongst the partners.

5. Zakir, the manager was admitted by Khurram and Yasmeen with a third share
in the profits and a salary of Rs. 30,000 per annum. Khurram and Yasmeen
were sharing profits in the ratio of 3:2. Zakir as manger was getting a salary
of Rs. 9000 Per annum and commission at 5% on net profits after charging
such commission and salary.

The excess of Zakir’s 1/3 share in the profits over his remuneration (Drawn in
the capacity of manager) is to be borne by Khurram and Yasmeen in the ratio
of 2:3. Profits for the year before charging commission but after charging
salary were Rs. 42,000. Distribute profits.

6. The capital accounts of Amit and Binod stood at Rs. 40000 and 30000
respectively after the necessary adjustments in respect of drawings and the
net profit for the year ended 31st Dec, 1995. It was subsequently ascertained
that 5 % P.a interest on capital and drawings were not taken into account in
arriving at the net profits.

The drawings of the partners had been Amit- 12000 drawn at the end of each
quarter and Binod-18000 Drawn at the end of each half year. The profits for
the year as adjusted to Rs. 20,0000. The partners shared profit in the
proportion 3:2 respectively.

You are required to pass journal entries and to show the adjusted capital account of the partners and
profit and loss appropriation account.