Question

X, Y and Z commenced business on 1st April, 2013 with capitals of Rs. 1,00,000, Rs. 80,000 and Rs. 60,000 respectively. Profit & losses were shared in the ratio of 4 : 3 : 3 respectively. Capitals carried interest at 5% p.a.

During the years ended 31st March 2014 and 2015, they made profits of Rs. 40,000 and Rs. 50,000 before allowing interest on capitals. Drawings of each partner were Rs. 10,000 per year.

On 31st March, 2015 the firm was dissolved. Creditors on that date were Rs. 24,000. The assets realised a net amount of Rs. 2,60,000.

Prepare capital accounts of partners for two years till the books are finally closed and the realisation account.

Answer 1

Interest on Capitals allowed to X. Y and Z in the first year amounts to Rs. 5,000, Rs. 4,000 and Rs. 3,000 respectively. Hence, the amount of net profit to be distributed among the partners in the first year is Rs. 40,000 (-) Interest on Capitals Rs. 12,000 = Rs. 28,000.

Interest on Capitals allowed to X, Y and Z in the second year amounts to Rs. 5,310, Rs. 4,120 and Rs. 3,070 respectively. Hence, the amount of net profit to be distributed among the partners in the second year is Rs 50,000 (-) Interest on Capitals Rs. 12,500 = Rs. 37,500.

$\text{Dr.}\text{CAPITAL ACCOUNTS}\text{Cr.}$
$\begin{array}{cccccccccc}\text{Date}& \text{Particulars}& X(Rs.)& Y(Rs.)& Z(Rs.)& \text{Date}& \text{Particulars}& X(Rs.)& Y(Rs.)& Z(Rs.)\\ 2014& & & & & 2013& & & & \\ \text{Mar. 31}& \text{Drawings A/c}& 10,000& 10,000& 10,000& \text{Apr. 1}& \text{Bank A/c}& 1,00,000& 80,000& 60,000\\ \text{Mar. 31}& \text{Balance c/d}& 1,06,200& 82,400& 61,400& 2014& & & & \\ & & & & & \text{Mar. 31}& \text{Interest on Capital}& 5,000& 4,000& 3,000\\ & & & & & \text{Mar. 31}& \text{Profit \& Loss}& & & \\ & & & & & & \text{Appropriation A/c}& 11,200& 8,400& 8,400\\ & & \underset{–}{\overline{1,16,200}}& \underset{–}{\overline{92,400}}& \underset{–}{\overline{71,400}}& & & \underset{–}{\overline{1,16,200}}& \underset{–}{\overline{92,400}}& \underset{–}{\overline{71,400}}\\ 2015& & & & & 2014& & & & \\ \text{Mar.31}& \text{Drawings A/c}& 10,000& 10,000& 10,000& Apr.1& \text{Balance b/d}& 1,06,200& 82,400& 61,400\\ \text{Mar. 31}& \text{Balance c/d}& 1,16,510& 87,770& 65,720& 2015& & & & \\ & & & & & \text{Mar. 31}& \text{Interest on Capitals}& 5,310& 4,120& 3,070\\ & & & & & \text{Mar. 31}& \text{Profit \& Loss}& & & \\ & & & & & & \text{Appropriation A/c}& 15,000& 11,250& 11,250\\ & & \underset{–}{\overline{1,26,510}}& \underset{–}{\overline{97,770}}& \underset{–}{\overline{75,720}}& & & \underset{–}{\overline{1,26,510}}& \underset{–}{\overline{97,770}}& \underset{–}{\overline{75,720}}\end{array}$

Following balance sheet will be prepared on 31st March, 2015 in order to find out the missing figure of Sundry Assets on the date of dissolution:

BALANCE SHEET as at 31st March, 2015
$\begin{array}{cccc}\text{Capital and Liabilities}& \text{Rs.}& \text{Assets}& \text{Rs}\\ \text{Creditors}& 24,000& \text{Sundry Assets (Bal.fig.)}& 2,94,000\\ \text{Capital:}& & & \\ X1,16,510& & & \\ Y87,770& & & \\ Z\underset{–}{65,720}& 2,70,000& & \\ & \underset{–}{\overline{2,94,000}}& & \underset{–}{\overline{2,94,000}}\end{array}$

$\text{Dr.}\text{REALISATION ACCOUNTS}\text{Cr.}$
$\begin{array}{cccc}\text{Particulars}& \text{Rs}& \text{Particulars}& \text{Rs}\\ \text{Sundry Assets}& 2,94,000& \text{Creditors}& 24,000\\ \text{Bank A/c}& & \text{Bank A/c}& 2,60,000\\ \text{(Payment to Creditors)}& 24,000& \text{Loss transferred to:}& \\ & & \text{Capital Accounts:}& \\ & & X13,600& \\ & & Y10,200& \\ & & Z\underset{–}{10,200}& 34,000\\ & \underset{–}{\overline{3,18,000}}& & \underset{–}{\overline{3,18,000}}\end{array}$
$\text{Dr.}\text{CAPITAL ACCOUNTS}\text{Cr.}$
$\begin{array}{cccccccc}\text{Particulars}& X& Y& Z& \text{Particulars}& X& Y& Z\\ & Rs& Rs& Rs& & Rs& Rs& Rs\\ \text{Realisation A/c}& 13,600& 10,200& 10,200& \text{Balance b/d}& 1,65,510& 87,770& 65,720\\ \text{Cash A/c}& 1,02,910& 77,570& 55,520& & & & \\ & \underset{–}{\overline{1,16,510}}& \underset{–}{\overline{87,770}}& \underset{–}{\overline{65,720}}& & \underset{–}{\overline{1,16,510}}& \underset{–}{\overline{87,770}}& \underset{–}{\overline{65,720}}\end{array}$