Fixed and Fluctuating Capitals Solutions

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Accounting for Partnership : Basic Concepts – Fixed and Fluctuating Capitals Solutions
1. Triphati and Chauhan are partners in a firm sharing profits and losses in the ratio of 3:2. Their capitals were ₹ 60,000 and ₹ 40,000 as on April 01, 2015. During the year they earned a profit of ₹ 30,000. According to the partnership deed both the partners are entitled to ₹ 1,000 per month as salary and 5% p.a. interest on their capital. They are also to be charged an interest of 5% p.a. on their drawings, irrespective of the period, which is ₹ 12,000 for Tripathi, ₹ 8,000 for Chauhan. Prepare Partner’s capital/current Accounts when, capitals are fixed.
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Date
Particulars
J.F.
Amount

Tripathi
Amount

Chauhan
Date
Particulars
J.F.
Amount

Tripathi
Amount

Chauhan
To Balance c/d
60,000
40,000
By Balance b/d
60,000
40,000
60,000
40,000
60,000
40,000
Date
Particulars
J.F.
Amount

Tripathi
Amount

Chauhan
Date
Particulars
J.F.
Amount

Tripathi
Amount

Chauhan
To Drawings A/c
12,000
8,000
By Partners’ Salaries A/c
12,000
12,000
To Interest on Drawings A/c
600
400
By Interest on Capital A/c
3,000
2,000
To Balance c/d
3,600
6,400
By Profit and Loss Appropriation A/c
1,200
800
16,200
14,800
16,200
14,800
Working Notes:
Salary of each partner:
Per month
= ₹ 1,000
Per year
= ₹ 1,000 × 12
= ₹ 12,000
Total
= ₹ 24,000
Interest on Capital:
Tripathi
{= ₹~60,000 × \dfrac{5}{100}}
= ₹ 3,000
Chauhan
{= ₹~40,000 × \dfrac{5}{100}}
= ₹ 2,000
Total
= ₹ 5,000
Interest on Drawings:
Tripathi
{= ₹~12,000 × \dfrac{5}{100}}
= ₹ 600
Chauhan
{= ₹~8,000 × \dfrac{5}{100}}
= ₹ 400
Total
= ₹ 1,000
Profit (to be distributed):
Net Profit
₹ 30,000
Partners’ Salaries
(₹ 24,000)
Interest on Capital
(₹ 5,000)
Interest on Drawings
₹ 1,000
₹ 2,000
Profit Share:
Tripathi
{= ₹~2,000 × \dfrac{3}{5}}
= ₹ 1,200
Chauhan
{= ₹~2,000 × \dfrac{2}{5}}
= ₹ 800

2. Anubha and Kajal are partners of a firm sharing profits and losses in the ratio of 2:1. Their capital, were ₹ 90,000 and ₹ 60,000. The profit during the year were ₹ 45,000. According to partnership deed, both partners are allowed salary, ₹ 700 per month to Anubha and ₹ 500 per month to Kajal. Interest allowed on capital @ 5%p.a. The drawings during the year were ₹ 8,500 for Anubha and ₹ 6,500 for Kajal. Interest is to be charged @ 5% p.a. on drawings. Prepare partners capital accounts, assuming that the capital account are fluctuating.
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Date
Particulars
J.F.
Amount

Anubha
Amount

Kajal
Date
Particulars
J.F.
Amount

Anubha
Amount

Kajal
To Drawings A/c
8,500
6,500
By Balance b/d
90,000
60,000
To Interest on Drawings A/c
425
325
By Partners’ Salaries A/c
8,400
6,000
To Balance c/d
1,09,875
70,125
By Interest on Capital A/c
4,500
3,000
By Profit and Loss Appropriation A/c
15,900
7,950
1,18,800
76,950
1,18,800
76,950
Working Notes:
Salary
Anubha’s Salary:
Monthly
= ₹ 700
Yearly
= ₹ 700 × 12
= ₹ 8,400
Kajal’s Salary:
Monthly
= ₹ 500
Yearly
= ₹ 500 × 12
= ₹ 6,000
Total
= ₹ 14,400
Interest on Capital
Anubha
{= ₹~90,000 × \dfrac{5}{100}}
= ₹ 4,500
Kajal
{= ₹~60,000 × \dfrac{5}{100}}
= ₹ 3,000
Total
= ₹ 7,500
Interest on Drawings
Anubha
{= ₹~8,500 × \dfrac{5}{100}}
= ₹ 425
Kajal
{= ₹~6,500 × \dfrac{5}{100}}
= ₹ 325
Total
= ₹ 750
Profit (to be distributed):
Net Profit
₹ 45,000
Total Salary
(₹ 14,400)
Interest on Capital
(₹ 7,500)
Interest on Drawings
₹ 750
₹ 23,850
Profit Share:
Anubha
{= ₹~23,850 × \dfrac{2}{3}}
= ₹ 15,900
Kajal
{= ₹~23,850 × \dfrac{1}{3}}
= ₹ 7,950