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Question
Answer in one sentence only.
Why is a partnership deed prepared?
Solution
A partnership deed defines the relationship among the partners. So, it acts as evidence in case of disputes among the partners of a firm. Therefore, it is advised to prepare a partnership deed.
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RELATED QUESTIONS
In the absence of Partnership Deed, interest on a loan of a partner is allowed :
(1) at 8% per annum
(2) at 6% per annum
(3) no interest is allowed
(4) at 12% per annum
Under which major headings and sub-headings will the following items be shown in the Balance Sheet of a company as per Schedule VI Part I of the Companies Act, 1956 :
(i) A balance of the Statement of Profit and Loss.
(ii) A loan of Rs 1,00,000 payable after three years.
(iii) Short-term deposits payable on demand.
(iv) Loose tools
(v) Trademark
(vi) Land
(vii) Cash at the bank
(viii) Trade payables
In the absence of partnership agreement, interest on drawings of partners is charged :
(1) at 6% per annum
(2) at 9% per annum
(3) at 12% per annum
(4) no interest is charged
Under which major heads and subheads will the following items be placed in the Balance Sheet of a company as per Schedule VI Part I of the Companies Act, 1956 :
(1) Bank overdraft.
(2) Cash and Cash Equivalents.
(3) Securities premium.
(4) The negative balance of the Statement of Profit and Loss.
(5) Goodwill.
(6) Trademark.
(7) 5 years loan obtained from SBI.
(8) Investments.
Does partnership firm has a separate legal entity? Give reason in support of your answer.
What is meant by Partnership deed?
what is trial balance ?
Unsold stock of Joint Venture taken over by co-venturer is credited to ____.
What is a Computer?
An account opened in the bank in a joint name of the co-venturers.
Apate, Bachute and Chapate undertook construction of the Cultural Hall of a Company at a contract price of Rs. 60,000 payable in Cash Rs. 40,000 and Rs. 20,000 in the form of Debentures of a company. They shared profits and losses in the ratio of 3 : 2 : 1 respectively. Apate Rs. 30,000, Bachute Rs. 20,000, Chapate Rs. 10,000.
The following payments are made out through Joint Bank Account.
| 1. | Purchase of materials | Rs. | 25,000 |
| 2. | Payment of wages | Rs. | 7,700 |
| 3. | Purchase of plant | Rs. | 4,500 |
| 4. | Other charges | Rs. | 1,100 |
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Apate brings a truck of | Rs. | 4,000 |
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Bachute brings materials of | Rs. | 5,500 |
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Chapate brings a mixer worth | Rs. | 1,000 |
At the close of the venture the unused materials were taken by Apate for Rs. 500.
The truck was sold in the market for Rs. 2,200.
Chapate agreed to take over the debentures at Rs. 19,000.
| Prepare : | 1. | Joint Venture Account |
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2. | Joint Bank Account |
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3. | Co-Venturer's Account |
State whether the following statement are True or False.
Partnership agreement must be in written form.
State whether the following statement are True or False.
If the partnership deed is silent, partners share profits and losses equally.
State whether the following statement are True or False.
Partnership is an association of two or more persons.
State whether the following statement is True or False.
Receipts and payments account is a real account.
The following information has been provided by M/s Achyut Health Care. You are required to calculate the amount of medicines consumed during the year 2020-21:
| Particulars | Amount(₹) |
| Stock of medicines as on April 1, 2020 | 15,00,000 |
| Creditors for medicines as on April 1,2020 | 3,50,000 |
| Stock of medicines as on March 31,2021 | 10,00,000 |
| Creditors for medicines as on March 31, 2021 | 4,20,000 |
| Cash purchases of medicines during the year 2020-21 | 2,00,000 |
| Credit purchases of medicines during the year 2020-21 | 6,00,000 |
Nirmala, Divisha and Sara were partners in firm sharing profits and losses in the 3 : 4 : 3. Books were closed on 31st March every year. Sara died on 1st February, 2022. As per the partnership deed, Sara's executors are entitled to her share of profit till the date of death on the basis of Sales turnover. Sales for the year ended 31st March 2021 was ₹ 10,00,000 and profit for the same year was ₹ 1,20,000. Sales show a positive trend of 20% and the percentage of profit earning is reduced by 2%.
Journalise the transaction along with the working notes.
Ajay, Manish and Sachin were partners sharing profits in the ratio 5:3:2. Their Capitals were ₹ 6,00,000; ₹ 8,00,000 and ₹ 11,00,000 as on April 01, 2021. As per Partnership deed, Interest on Capitals were to be provided @ 10% p.a. For the year ended March 31, 2022, Profits of ₹ 2,00,000 were distributed without providing for Interest on Capitals. Pass an adjustment entry and show the workings clearly.
A partnership firm has four partners. How many additional partners can be admitted into the business as per the provisions of the Companies Act, 2013?
P, Q and R were partners in a firm sharing profits and losses in the ratio of 2:1:2. Their balance sheet on 31st March, 2022 was as follow:
| Balance sheet of P, Q and R as on 31.3.2022 | |||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Creditors | 48,000 | Bank | 25 000 | ||
| Bills Payable | 22,000 | Debtors | 75,000 | ||
| General Reserve | 80,000 | Stock | 2,00,000 | ||
| Profit for 2021-22 | 2,00,000 | Machinery | 3,00,000 | ||
| Capitals: | Land and Building | 10,00,000 | |||
| p | 5,00,000 | 12,50,000 | |||
| Q | 2,50,000 | ||||
| R | 5,00,000 | ||||
| 16,00,000 | 16,00,000 | ||||
On 30th June, 2022, Q died. The partnership deed provided that on the death of a partner his executors will be entitled for the following:
- Balance in his capital account.
- Interest on capital @ 6% p.a.
- His share in the profits of the firm till the date of his death calculated on the basis of last year's profit.
- His share in the goodwill of the firm calculated on the basis of the three years purchase of the average profits of last four years.
Profits for 2018-19 were ₹ 3,00,000, for 2019-20 were ₹ 4,00,000 and for 2020-21 were ₹ 1,00,000.
On 1.6.2022 Q withdrew ₹ 50,000 for meeting his medical expenses.
Prepare Q's Capital account on his death to be presented to his executors.
Assertion (A): Partnership is the relation between persons who have agreed to share the profits of the business carried on by all or any of them acting for all.
Reason (R): If a partner carries on any business of the same nature and competing with that of the firm, he/she shall account for and pay to the firm all profit made by him/her in that business.
Interest on Partner’s loan is credited to ______.
The fixed capital accounts of Shiv, Azeem and Angad, sharing profits and losses in the ratio of 2 : 2 : 1, stood at ₹ 4,00,000, ₹ 6,00,000 and ₹ 2,00,000 respectively.
The accounts for the year ended 31st March, 2022, were drawn up and closed and the Current Account balances of the partners were determined to be:
Shiv ₹ 35,000, Azeem ₹ 40,000 and Angad ₹ 25,000.
Subsequently, the following errors were discovered on 1st April, 2022:
- Interest on capital @ 10% per annum had been allowed to the partners, although there was no provision for it in the partnership deed.
- Salary of ₹ 16,000 per annum to Shiv and ₹ 20,000 per annum to Azeem was not allowed to them, despite a provision for salary in the partnership deed.
- Commission of ₹ 24,000 was not allowed to Angad, despite a provision for commission in the partnership deed.
You are required to prepare the adjusted Current Accounts of the partners on 1st April, 2022, to rectify the lapse in accounting.
Amit and Iqbal are partners in a business. Their partnership deed contained the following clauses:
- Interest on drawings to be charged @ 6% per annum.
- Amit to get a salary of ₹ 1,000 per month.
- Iqbal to get an annual commission of ₹ 10,000.
- Any partner taking a loan from the firm to be charged interest on it @ 8% per annum.
| Additional Information | Amit (₹) | Iqbal (₹) |
| Drawings made on 1st May, 2022 | 30,000 | |
| Borrowed from the firm on 1st July, 2022 | 10,000 | |
| Capital Balances on 31st March, 2023 | 75,000 | 10,000 (Dr) |
| Divisible profits for the year 2022-23 credited to the Partners' Capital Accounts | 9,000 | 9,000 |
You are required to:
- Give the closing journal entry for interest on loan due from Amit.
- Find the opening capital balance of the partners on 1st April, 2022, by preparing the Partners' Capital Accounts for the year 2022-23.
