Partnership and LLP AccountsQ- 18 | Partnership and LLP AccountsQuestion 4874 of 108
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X and Y are partners sharing profits and losses in the ratio of their effective capital. As on 1st April, 2023, they had ₹ 2,80,000 and ₹ 1,60,000 respectively in their Capital Accounts. X introduced a further capital of 20,000 on 1 June, 2023 and another 15,000 on 1st October, 2023. On 31 January, 2024, X withdrew 25,000. On 1 August, 2023 Y Introduced further capital of ₹ 30,000. During the Financial year 2023-24, the partners drew the following amounts in anticipation of profit: X drew 5,000 at the beginning of each quarter and Y drew 1,500 per month at the end of each month beginning from April, 2023 As per partnership agreement, the profits were to be shared in capital ratio. The interest on Capital @ 12% p.a. is allowable and interest on drawings @ 10% p.a. is chargeable. You are required to calculate (i) Profit-sharing ratio; (ii) Interest on capital; and (iii) interest on drawings. [Jan. 2025, 5 Marks]

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Detailed Solution & Explanation

Calculation of interest on Capital on 31st March, 2024 Date Amount (X) Period Product 1st April, 2023 1st June, 2023 1st Oct, 2023 31st Jan, 2024 2,80,000 3,00,000 3,15,000 2,90,000 2 months 4 months 4 months 2 months 5,60,000 12,00,000 12,60,000 5,80,000 36,00,000 Date Amount (Y) Period Product 1st April, 2023 1st Aug, 2023 1,60,000 1,90,000 4 months 8 months 6,40,000 15,20,000 21,60,000 (i) Profit Sharing Ratio Total product of X: Total Product of Y = 36,00,000 : 21,60,000 = 5 : 3 (ii) Interest on capital of X = Total Product x 12 / 100 x 1 / 12 = 36,00,000 x 12 / 100 x 1 / 12 = 36,000 Interest on capital of Y = 21,60,000 X 12 / 100 x 1 / 12 = 21,600 Calculation of interest on Drawings on 31st March, 2024 Date Amount (X) Period Product 1st April, 2023 1st July, 2023 1st Oct, 2023 31st Jan, 2024 5,000 5,000 5,000 5,000 12 months 9 months 6 months 3 months 60,000 45,000 30,000 15,000 1,50,000 Interest on drawings of X = 1,50,000 X 10/100 x 1/12 = 1,250 Or [5 000 X 4] X 10/100 x 7.5/12 = 1,250 Interest on drawings of Y = 1,500 x 12 x 10 /100 x 5.5 /12 = 825.

About This Chapter: Partnership & Companies

Paper

Paper 1: Accounting

Weightage

15-20%

Key Topics

Admission, Retirement, Death, Shares, Debentures

This chapter covers Admission, Retirement, Death, Shares, Debentures and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.

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More Questions from Partnership and LLP Accounts

Following are the details of Assets and Liabilities of Mr. Sarthak for the year ended 31 March, 2023 and 31 March, 2024: 31.03.2023 31.03.2024 Assets Buildings Furniture Inventory Sundry debtors Cash at bank Cash in hand Liabilities: Loans Sundry Creditors 2,00,000 75,000 1,05,000 68,000 72,500 2,400 1,50,000 58,400 ? ? 1,95,000 94,000 86,800 3,800 1,25,000 79,500 It was decided to depreciate Building by 5% p.a. and Furniture by 10% p.a. On 1st June, 2023 an additional capital of 40,000 was brought in the business. Proprietor has withdrawn @ ₹ 2,500 p.m. for meeting the family expenses. Prepare Statement of Affairs as on 31 March, 2023 and 31 March, 2024. Find the profit or loss earned by Mr. Sarthak for the year ended 31st March, 2024. [Jan. 2025, 5 Marks]

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