Accountancy

X and Y are partners sharing profits and losses in the ratio of 2: 3 with capitals Rs. 2,00,000 and Rs. 3,00,000 respectively. On 1st October, 2018, X and Y gave loans of Rs. 80,000 and Rs. 40,000 respectively to the firm. Show distribution of profits/losses for the year ended 31st March, 2019 in each of the following alternative cases: Case 1: If the profits before interest for the year amounted to Rs. 21,000. Case 2: If the profits before interest for the year amounted to Rs. 3,000. Case 3: If the profits before interest for the year amounted to Rs. 5,000. Case 4: If the loss before interest for the year amounted to Rs. 1,400.

Solution

Continue ReadingX and Y are partners sharing profits and losses in the ratio of 2: 3 with capitals Rs. 2,00,000 and Rs. 3,00,000 respectively. On 1st October, 2018, X and Y gave loans of Rs. 80,000 and Rs. 40,000 respectively to the firm. Show distribution of profits/losses for the year ended 31st March, 2019 in each of the following alternative cases: Case 1: If the profits before interest for the year amounted to Rs. 21,000. Case 2: If the profits before interest for the year amounted to Rs. 3,000. Case 3: If the profits before interest for the year amounted to Rs. 5,000. Case 4: If the loss before interest for the year amounted to Rs. 1,400.

A and B are partners in a firm sharing profits in the ratio of 3: 2. They had advanced to the firm a sum of Rs. 30,000 as a loan in their profit-sharing ratio on 1st October, 2017. The Partnership Deed is silent on interest on loans from partners. Compute interest payable by the firm to the partners, assuming the firm closes its books every year on 31st March.

Solution Amount advanced by the Partners = Rs 30,000Profit sharing ratio = 3: 2Advanced by A =30,000×3/5=18,000Advanced by B =30,000×2/5=12,000Time Period (from October 01, 2017 to March 31, 2018) = 6 monthsInterest…

Continue ReadingA and B are partners in a firm sharing profits in the ratio of 3: 2. They had advanced to the firm a sum of Rs. 30,000 as a loan in their profit-sharing ratio on 1st October, 2017. The Partnership Deed is silent on interest on loans from partners. Compute interest payable by the firm to the partners, assuming the firm closes its books every year on 31st March.

Harshad and Dhiman are in partnership since 1st April, 2018. No partnership agreement was made. They contributed Rs. 4,00,000 and Rs. 1,00,000 respectively as capital. In addition, Harshad advanced an amount of Rs. 1,00,000 to the firm on 1st October, 2018. Due to long illness, Harshad could not participate in business activities from 1st August, 2018 to 30th September, 2018.  Profit for the year ended 31st March, 2019 was Rs. 1,80,000. Dispute has arisen between Harshad and Dhiman. Harshad Claims: (i) He should be given interest @ 10% per annum on capital and loan; (ii) Profit should be distributed in the ratio of capital; Dhiman Claims: (i) Profit should be distributed equally; (ii) He should be allowed Rs. 2,000 p.m. as remuneration for the period he managed the business in the absence of Harshad; (iii) Interest on Capital and loan should be allowed @ 6% p.a. You are required to settle the dispute between Harshad and Dhiman. Also prepare Profit and Loss Appropriation Account.

SolutionDISTRIBUTION OF PROFITS Harshad Claims:Decisions(i) If there is no agreement on interest on partner’s capital, according to Indian partnership act 1932, no interest will be allowed to partners.(ii) If there is no…

Continue ReadingHarshad and Dhiman are in partnership since 1st April, 2018. No partnership agreement was made. They contributed Rs. 4,00,000 and Rs. 1,00,000 respectively as capital. In addition, Harshad advanced an amount of Rs. 1,00,000 to the firm on 1st October, 2018. Due to long illness, Harshad could not participate in business activities from 1st August, 2018 to 30th September, 2018.  Profit for the year ended 31st March, 2019 was Rs. 1,80,000. Dispute has arisen between Harshad and Dhiman. Harshad Claims: (i) He should be given interest @ 10% per annum on capital and loan; (ii) Profit should be distributed in the ratio of capital; Dhiman Claims: (i) Profit should be distributed equally; (ii) He should be allowed Rs. 2,000 p.m. as remuneration for the period he managed the business in the absence of Harshad; (iii) Interest on Capital and loan should be allowed @ 6% p.a. You are required to settle the dispute between Harshad and Dhiman. Also prepare Profit and Loss Appropriation Account.

Following differences have arisen among P, Q and R. State who is correct in each case: (a) P used Rs. 20,000 belonging to the firm and made a profit of Rs. 5,000. Q and R want the amount to be given to the firm? (b) Q used Rs. 5,000 belonging to the firm and suffered a loss of Rs. 1000. He wants the firm to bear the loss? (c) P and Q want to purchase goods from A Ltd., R does not agree? (d) Q and R want to admit C as partner, P does not agree? (e) R had given loan of Rs. 1,00,000 to firm and demands interest @ 10% p.a. P and Q do not want to pay the interest.

Solution (a) P is bound to pay Rs. 20,000 together with profit of Rs. 5,000 to the firm because this amount belongs to the firm.Explanation: As per Principal and Agent…

Continue ReadingFollowing differences have arisen among P, Q and R. State who is correct in each case: (a) P used Rs. 20,000 belonging to the firm and made a profit of Rs. 5,000. Q and R want the amount to be given to the firm? (b) Q used Rs. 5,000 belonging to the firm and suffered a loss of Rs. 1000. He wants the firm to bear the loss? (c) P and Q want to purchase goods from A Ltd., R does not agree? (d) Q and R want to admit C as partner, P does not agree? (e) R had given loan of Rs. 1,00,000 to firm and demands interest @ 10% p.a. P and Q do not want to pay the interest.

In the absence of Partnership Deed, what are the rules relation to: (a) Salaries of partners, (b) Interest on partners’ capitals (c) Interest on partners’ loan (d) Division of profit, (e) Interest on partners’ drawings (f) Interest on loan by partner(s) and (g) Interest on loan to partners?

Solution   Items (Points) Provision in the Absence of Partnership Deed(a) Salaries of Partners No Salary will be allowed to Partners.(b) Interest on Partners’ Capitals No interest will be allowed to Partners on Capital(c) Interest on Partners’ Loan 6% p.a.…

Continue ReadingIn the absence of Partnership Deed, what are the rules relation to: (a) Salaries of partners, (b) Interest on partners’ capitals (c) Interest on partners’ loan (d) Division of profit, (e) Interest on partners’ drawings (f) Interest on loan by partner(s) and (g) Interest on loan to partners?

Office Products Ltd, issued on 1st April, 2018, 20,000, 9% Debentures of Rs. 100 each at a premium of 10% redeemable at a premium of 5% after 5 years. Issue price was payable along with application. Pass the necessary Journal entries.

Solution

Continue ReadingOffice Products Ltd, issued on 1st April, 2018, 20,000, 9% Debentures of Rs. 100 each at a premium of 10% redeemable at a premium of 5% after 5 years. Issue price was payable along with application. Pass the necessary Journal entries.

On 1st April, 2015. Mathew Ltd. issued 10,000, 9% Debentures of Rs. 100 each at a discount of 5%, redeemable at a premium of 5%. These debentures were redeemable as follows:

On 31st March, 20162,000 DebenturesOn 31st March, 20175,000 DebenturesOn 31st March, 20183,000 Debentures Prepare the Loss on Issue of Debentures Account, Debentures Account and Premium on Redemption of Debentures Account…

Continue ReadingOn 1st April, 2015. Mathew Ltd. issued 10,000, 9% Debentures of Rs. 100 each at a discount of 5%, redeemable at a premium of 5%. These debentures were redeemable as follows:

On 1st April, 2017, Solar Power Ltd. issued 10,000, 8% Debentures of Rs. 100 each at a discount of 5% redeemable at a premium of 15% at the end of five years. All the debentures were subscribed and allotment was made. The company had balance in Securities Premium Reserve of Rs. 80,000. Prepare the Balance Sheet (extract) as at 31st March, 2018.

Solution

Continue ReadingOn 1st April, 2017, Solar Power Ltd. issued 10,000, 8% Debentures of Rs. 100 each at a discount of 5% redeemable at a premium of 15% at the end of five years. All the debentures were subscribed and allotment was made. The company had balance in Securities Premium Reserve of Rs. 80,000. Prepare the Balance Sheet (extract) as at 31st March, 2018.

On 1st June, 2017, R Energy Ltd. issued 10,000, 7% Debentures of Rs. 100 each at a discount of 10% redeemable at a premium of 10% at the end of five years. All the debentures were subscribed and allotment was made. Prepare the Balance Sheet (extract) as at 31st March, 2018.

Solution

Continue ReadingOn 1st June, 2017, R Energy Ltd. issued 10,000, 7% Debentures of Rs. 100 each at a discount of 10% redeemable at a premium of 10% at the end of five years. All the debentures were subscribed and allotment was made. Prepare the Balance Sheet (extract) as at 31st March, 2018.