Sun and Moon Practise Problem | Q: 9 | Page no. 61 Chapter 1: Introduction to Partnership and Partnership Final Accounts
Chapter 1: Introduction to Partnership and Partnership Final Accounts
Practise Problem | Q: 9 | Page no. 61
Sun and Moon are Partners in Partnership Firm sharing Profits and Losses equally. You are required to give the effects of Adjustments with the help of the following information.
Trial Balance as on 31st March 2019
Debit Balance
Amount ₹
Credit Balance
Amount ₹
Land & Building
40,000
Capital A/C
Furniture
18,000
Sun
33,500
Machinery
40,000
Moon
33,500
(Purchased on 1/7/18)
Current A/c: Sun
6,000
Goodwill
2,000
Sundry Creditors
25,000
Wages
2,000
Bank Overdraft
10,000
Current A/c: Moon
4,000
Reserve Fund
5,000
8% Debentures
8,000
Provident Fund
5,000
(Purchased on 1/10/18)
Provident Fund Investment
3,500
Stock of Postal stamps
500
Total
1,18,000
Total
1,18,000
Adjustments:
Partners are entitled to get a salary ₹ 6,000 p.a. in addition to their profit & loss sharing.
Depreciation on Land & Building, Furniture & Machinery @10%, 5% and 3% respectively.
Interest on Capital 5% p.a.
Closing Stock ₹ 60,743.
Wages included ₹ 1,000 as advance is given to workers.
Interest due but not paid ₹ 800.
Total Net Profit amounted to ₹ 38,113.
Solution:
In the books of Sun and Moon
Partner’s Current Account
Particulars (Dr.)
Sun ₹
Moon ₹
Particulars (Cr.)
Sun ₹
Moon ₹
To Balance b/d
4,000
By Balance b/d
6,000
-
By Profit and Loss A/c (Share in Net Profit)
19,056
19,057
(Moon's share rounded to nearest rupee)
By Profit and Loss A/c (Partners Salary)
6,000
6,000
By Profit and Loss A/c (Interest on Capital)
1,675
1,675
To Balance c/d
32,731
22,732
Total
32,731
26,732
Total
32,731
26,732
Balance Sheet as on 31st March 2019
Liabilities
Amount ₹ (Inner)
Amount ₹ (Outer)
Assets
Amount ₹ (Inner)
Amount ₹ (Outer)
Capital Accounts:
Land & Building
40,000
Sun
33,500
Less: Depreciation (10%)
4,000
36,000
Moon
33,500
67,000
Furniture
18,000
Current A/cs:
Less: Depreciation (5%)
900
17,100
Sun
32,731
Machinery
40,000
Moon
22,732
55,463
Less: Depreciation (3% for 9m)
900
39,100
Sundry Creditors
25,000
Goodwill
2,000
Bank Overdraft
10,000
8% Debentures (Investment)
8,000
Reserve Fund
5,000
Add: O/s Interest (for 6m)
320
8,320
Provident Fund
5,000
Provident Fund Investments
3,500
O/s Interest (on Bank Overdraft/Loan - assumed)
800
Stock of Postal Stamps
500
Closing Stock
60,743
Advance to Workers
1,000
Total Liabilities
1,68,263
Total Assets
1,68,263
Working Notes:
Depreciation on machinery is calculated for 9 months. (i.e. from 1/7/18 to 31/3/19)
Depreciation = 40,000 x (3/100) x (9/12) = ₹ 900.
Interest on 8% Debentures (Investment) is calculated for 6 months. (i.e. from 1/10/18 to 31/3/19)
Interest = 8,000 x (8/100) x (6/12) = ₹ 320. (This is an income receivable, an asset)
Advance given to workers (by firm) ₹ 1,000 is an asset for the firm, so, it is shown on Assets side.
Interest due but not paid ₹ 800 (Adjustment 6). This is a liability for the firm (e.g., on Bank Overdraft or another loan not specified in Trial Balance but implied by adjustment), shown on the Liabilities side.
Balbharati Solutions for Book-keeping and Accountancy 12th Standard HSC Maharashtra State Board
Chapter 1: Introduction to Partnership and Partnership Final Accounts
Partnership: A business owned and managed by two or more individuals (partners) who share profits or losses according to an agreed-upon ratio.
Final Accounts: Financial statements (like Profit & Loss Account and Balance Sheet) prepared at the end of an accounting year to show a business's financial performance and position.
Trial Balance: A list of all account balances (debits and credits) from the ledger, used to check the arithmetical accuracy of bookkeeping entries.
Debit (Dr.): An accounting entry that increases an asset or expense account, or decreases a liability, revenue, or equity account. Recorded on the left side of an account.
Credit (Cr.): An accounting entry that increases a liability, revenue, or equity account, or decreases an asset or expense account. Recorded on the right side of an account.
Assets: Things of value owned by the business (e.g., buildings, machinery, stock, cash).
Liabilities: Amounts owed by the business to outsiders (e.g., loans, creditors).
Capital: The funds invested in the business by the owners (partners).
Goodwill: The good reputation or established customer base of a business, considered an intangible asset.
Depreciation: The decrease in the value of an asset over time due to wear and tear, usage, or obsolescence.
Adjustments: Changes made to accounts at the end of an accounting period to accurately reflect income and expenses.
Bank Overdraft: A facility allowing a business to withdraw more money from its bank account than it holds, up to an agreed limit; it's a short-term liability.
Reserve Fund: Profits set aside for future needs or to strengthen the business's financial position.
Provident Fund: A retirement savings fund for employees, to which both employer and employee contribute; it's a liability for the firm.
Debentures: (If purchased by the firm, as in this problem) A type of investment in another company's debt, considered an asset. If issued by the firm, it's a liability.
Sundry Creditors: Individuals or businesses to whom the firm owes money for goods or services bought on credit.
p.a. (per annum): Yearly or annually.
b/d (brought down): The opening balance of an account.
c/d (carried down): The closing balance of an account, to be carried forward to the next period.
O/s (Outstanding): An amount that is due but not yet paid (outstanding expense) or earned but not yet received (outstanding income).
Net Profit: The profit remaining after all operating expenses, interest, and taxes have been deducted from total revenues.
Closing Stock: The value of goods remaining unsold at the end of the accounting period.
Partner's Current Account: An account used in partnerships (often with fixed capitals) to record transactions like interest on capital, salaries, drawings, and share of profit/loss for each partner.
