Class 12 Accountancy - Chapter Accounting for Partnership : Basic Concepts NCERT Solutions | Illustrate how interest on drawings will
Illustrate how interest on drawings will be calculated under various situations.
The partnership agreement may also provide for charging of interest on money withdrawn out of the firm by the partners for their personal use. As stated earlier, no interest is charged on the drawings if there is no express agreement among the partners about it. However if the partnership deed so provides for it, the interest is charged at an agreed rate, for the period money remained outstanding from the partners during an accounting year. Charging interest on drawings discourages excessive amounts of drawings by the partners. The calculation of interest in drawings under different situations are. When Fixed Amounts is Withdrawn Every Month : Many a times a fixed amount of money is withdrawn by the partners, at equal time interval, Aashish withdrew Rs. 10,000 per month from the firm for his personal use during the year ending March 31, 2006. The calculation of average period and the interest on drawings, in different situations would be as follows:
(a) When the amount is withdrawn at beginning end of each month
(b) When the amount is withdrawn at the end of each month
(c) When money is withdrawn in the middle of the month When money is withdrawn in the middle of the month, nothing is added or deduced from the total period. When Fixed Amount is withdrawn Quarterly. If the amount is withdrawn at the beginning of each quarter, the interest is calculated on the total money withdrawn during the year, for a period of seven and half months and if withdrawn at the end of each quarter it will be calculated for a period of 12 months.
Alternatively, the interest can be calculated on the total amount withdrawn during the accounting year, for a period of 12 months. When Varying Amounts are Withdrawn at Different Intervals. When the partners withdraw different amounts of money at different time intervals, the interest is calculated using the product method. When Dates of Withdrawal are not specified. When the total amount withdrawn is given but the dates of withdrawals are not specified, it is assumed that the amount was withdrawn evenly throughout the year.
More Questions From Class 12 Accountancy - Chapter Accounting for Partnership : Basic Concepts
- Q:-
If a fixed amount is withdrawn on the first day of every quarter, for what period the interest on total amount withdrawn will be calculated?
- Q:-
List the items which may be debited or credited in capital accounts of the partners when:
(i) Capitals are fixed.
(ii) Capital are fluctuating. - Q:-
Why is Profit and Loss Adjustment Account prepared? Explain.
- Q:-
Why it is considered desirable to make the partnership agreement in writing.
- Q:-
Give two circumstances under which the fixed capitals of partners may change.
- Q:-
In the absence of Partnership deed, specify the rules relating to the following :
(i) Sharing of profits and losses.
(ii) Interest on partner’s capital.
(iii) Interest on Partner’s drawings.
(iv) Interest on Partner’s loan
(v) Salary to a partner. - Q:-
Define Partnership Deed.
- Q:-
Priya and Kajal are partners in a firm, sharing profits and losses in the ratio of 5:3. The balance in their fixed capital accounts, on April 1, 2016 were: Priya, Rs. 6,00,000 and Kajal, Rs. 8,00,000. The profit of the firm for the year ended March 31, 2017 was Rs, 1,26,000. Calculate their shares of profits: (a) when there is no agreement in respect of interest on capital, and (b) when there is an agreement that the interest on capital will be allowed @ 12% p.a.
- Q:-
Reena and Raman are partners with capitals of Rs. 3,00,000 and Rs. 1,00,000 respectively. The profit for the year ended March 31, 2017 was Rs. 1,80,000, before paying rent for her personal building to be used as godown for firm to Reena payable at Rs. 5000 per month. Interest on capital is to be allowed at 6% p.a. Raman was entitled to a salary of Rs. 30,000 p.a. The drawings of partners were Rs. 30,000 and 20,000. The interest on drawings to be charged to Reena was Rs. 1,000 and to Raman, Rs. 500.
Assuming that Reena and Raman are equal partners. State their share of profit after necessary appropriations.
- Q:-
Mohan and Shyam are partners in a firm. State whether the claim is valid if the partnership agreement is silent in the following matters:
(i) Mohan is an active partner. He wants a salary of Rs. 10,000 per year;
(ii) Shyam had advanced a loan to the firm. He claims interest @ 10% per annum;
(iii) Mohan has contributed Rs. 20,000 and Shyam Rs. 50,000 as capital. Mohan wants equal share in profits.
(iv) Shyam wants interest on capital to be credited @ 6% per annum.
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