X and Y are partners sharing profits and losses in the ratio of their effective capital. As on 1 st April, 2023, they had - 2,80,000 and - 1,60,000…
CA Foundation · Accounting · PYQS · January 2025
X and Y are partners sharing profits and losses in the ratio of their effective capital. As on 1 st 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 st June, 2023 and another - 15,000 on 1 st October, 2023. On 31 st January, 2024, X withdrew - 25,000. On 1 st 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.
Suggested Answer and Working Notes:
(i) Calculation of Effective Capital X Amount Y Amount 2,80,000 invested for2 months i.e., 1,60,000 invested for4 months i.e., 5,60,000 invested for1 month 5,60,000 6,40,000 invested for1 month 6,40,000 3,00,000 invested for4 months i.e., 1,90,000 invested for8 months, i.e., 12,00,000 invested for1 month. 12,00,000 15,20,000 invested for1 month 15,20,000 3,15,000 invested for4 months i.e., 12,60,000 invested for1 month. 12,60,000 2,90,000 invested for2 months, i.e., 5,80,000 invested for1 month. 5,80,000 36,00,000 21,60,000 Effective capital is in the ratio36,00,000:21,60,000 therefore profit -sharing ratio i.e.5:3. (ii) Calculation of Interest on Capital X = 36,00,000 x 12/100 x 1/12 = 36,000 Y = 21,60,000 x 12/100 x 1/12 = 21,600 (iii) Calculation of Interest on Drawings X = 5,000 x 4 x 10/100 x 7.5/12 = 1,250 Y = 1,500 x 12 x 10/100 x 5.5/12 = 825
Topics: Partnership and LLP Accounts
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