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Tuesday, September 28, 2021

Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation Question and Answers PDF Download

Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation Question and Answers PDF Download: Students of Standard 12 can now download Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation question and answers pdf from the links provided below in this article. Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation Question and Answer pdf will help the students prepare thoroughly for the upcoming Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation exams.


Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation Question and Answers

Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation question and answers consists of questions asked in the previous exams along with the solutions for each question. To help them get a grasp of chapters, frequent practice is vital. Practising these questions and answers regularly will help the reading and writing skills of students. Moreover, they will get an idea on how to answer the questions during examinations. So, let them solve Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation questions and answers to help them secure good marks in class tests and exams.


Board

Kerala Board

Study Materials

Question and Answers

For Year

2021

Class

12

Subject

Accountancy

Chapters

Accountancy Chapter 1 Accounting for Not For Profit Organisation

Format

PDF

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Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation Question and Answers PDF Download

We have provided below the question and answers of Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation study material which can be downloaded by you for free. These Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation Question and answers will contain important questions and answers and have been designed based on the latest Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation, books and syllabus. You can click on the links below to download the Plus Two Accountancy Chapter 1 Accounting for Not For Profit Organisation Question and Answers PDF. 

Question 1.
The Receipts and payments account is a_______.
(a) Real Account
(b) Nominal Account
(c) Personal Account
(d) Impersonal Account
Answer:
(a) Real Account

Question 2.
The Revenue account prepared by a not-for-profit organisation is called.
(a) Receipt and Payment A/c
(b) Profit and Loss A/c
(c) Income and Expenditure A/c
(d) Statement of affairs
Answer:
(c) Income and Expenditure A/c

Question 3.
income and Expenditure A/c is prepared in order to ascertain_______.
(a) Profit or Loss
(b) Surplus or deficit
(c) Cash in hand and at bank
(d) Assets and Liabilities
Answer:
(b) Surplus or deficit.

Question 4.
The Receipts and payment account contains______.
(a) Capital receipts and payments only
(b) Revenue receipts and payments only
(c) All receipts and payments
(d) Petty receipts and payments only
Answer:
(c) All receipts and payments.

Question 5.
Income and Expenditure A/c is a______account.
(a) Nominal
(b) Real
(c) Personal
Answer:
(a) Nominal

Question 6.
Income and Expenditure A/c records transactions of______nature.
(a) Revenue
(b) Capital
(c) Both revenue and capital
Answer:
(a) Revenue

Question 7.
Choose odd one and give reasons.
(a) Tsunami arts and club
(b) Tsunami trading company
(c) Tsunami artis club
(d) Tsunami library
Answer:
(b) Tsunami trading company is a trading organisation, all others are non-trading organisation.

Question 8.
______represents the excess of the assets over liabilities.
Answer:
Capital Fund

Question 9.
The excess of income over expenditure is called______.
Answer:
Surplus

Question 10.
The amount received by a Non-profit organisation as per the will of a deceased person is called____.
Answer:
Legacy.

Question 11.
Receipts and payments A/c is maintained under_____system of accounting.
Answer:
Cash

Question 12.
Specific donation is a______receipt.
Answer:
Capital

Plus Two Accountancy Accounting for Not For Profit Organisation Two Mark Questions and Answers

Question 1.
Define Receipts and Payment Account.
Answer:
Receipts and Payment account is “a statement prepared at the end of an accounting year giving a summary of all receipts and payments recorded in cash book.” It is debited with all items of receipts and credited with all payments.

Question 2.
What are the difference between cash book and Receipts and payment A/c?
Answer:
The difference between Receipts and Payment A/c and cash book are as follows.

Receipts and Payment A/c Cash Book
1. Entries are not made date-wise
2. All entries are made in classified form
3. This accounts is opened by non-trading concern only.
1. All entriess are made date-wise
2. All entries are made in detail
3. This account is opened in both trading and non-trading concerns.

Question 3.
What do you mean by Income and Expenditure Account?
Answer:
An Income and Expenditure Account is a nominal account prepared by a not-for-profit organisation, in order to ascertain the surplus or deficit by recording revenue items of the particular period. It isparepared in the form of profit and loss account.

Question 4.
State whether the following expenditure is revenue or capital. Give reasons for your answers.

  1. The advertising expenditure, the benefit of which will last for 5 years.
  2. Registration fee paid at the time of purchase of a building.

Answer:
1. Revenue Expenditure / Deferred Revenue Expenditure:
Advertising expenditure is not written off completily to the profit and loss account of the accounting year during which it is incurred. It is spread overa number of years whose benefit is likely to be received.

2. Capital Expenditure:
Any amount spent on acquistion of an asset or for increasing the nature of an asset is called capital expenditure. Registration fee paid is a capital expenditure.

Question 5.
How will you treat Entrance fees in Income and Expenditure Account?
Answer:
The fee charged for admitting a person as a member in an institution is called admission fee or entrance fee. It is paid only once by the member, it is not of a recurring nature and should not be treated as income. There is another argument that though each member pays it only once, the institution receives it every year when new admission take place.

Therefore, it can be treated as revenue income. Here again if there is specific instruction to treat the entire or a portion of the amount as capital the relevant amount should be taken to Balance Sheet.

Plus Two Accountancy Accounting for Not For Profit Organisation Three Mark Questions and Answers

Question 1.
What are the Accounting records of not-for-profit organisation?
Answer:

  1. Not-for-profit organisation usually keep ‘a cash book’ in which all receipts and payments are recorded.
  2. They maintain ‘a ledger’ containing the accounts of all incomes, expenses, assets, and liabilities which facilities the preparationof financial state¬ments at the end of the accounting year.
  3. The final accounts of a non-profit organisation con¬sist of the following:
    • Receipts and payment Account
    • Income and Expenditure Account
    • Balance sheet

Question 2.
What are the procedure for preparing Balance sheet of not-for-profit organisation?
Answer:
Procedure for preparation of Balance sheet:
The balance sheet of a not-for-profit organisation is prepared as in any other organisation contains particulars of assets and liabilities on the date on which it is prepared.

The excess of assets over liabilities is called capital fund or general fund and it increase with surplus of income over expenditure and also certain other items which are capitalised. If the opening capital fund is not given, then the opening balance sheet is prepared in order to know the opening fund.

Question 3.
From the given particulars ascertain the amount to be credited to income and expenditure account for the year ending 31.12.08.
Subscription received during the year – Rs. 18,000
Subscription outstanding oh 31.12.08 – Rs. 1,000
Subscription received in advance on 31.12.08 – Rs. 1,200
Subscription received in advance on 31.12.07 – Rs. 700
Subscription outstanding on 31.12.07 – Rs. 100 of which Rs. 900 were received in 2008.
Answer:

Question 4.
Calculate expenses incurred for the year2009 from the following particulars.

Rs.
Expenses paid during 2009 950
Expenses outstanding 1.1.2009 300
Expenses outstanding on 31.12.2009 450
Expenses paid in advance on 1.1.2009 200
Expenses paid in advance on 31.12.2009 300

Answer:

Question 5.
From the following, calculate the amount to be shown in the Income and expenditure account, in respect of stationery. Payment made for stationery during the year Rs. 700. Stock of stationery on the opening date and closing date Rs. 50 and 90 respectively. Amount due for stationery bought during the year Rs. 140.
Answer:

Question 6.
Subscription received by Anuragha sports club during 2008 amounted to Rs. 25,400, which included Rs. 2,500 received in arrears forthe year2007 and Rs. 4,200 received in advance for 2009. It is found that Rs. 4000 has not been received for the current year (2008) and that Rs. 2,400 was received in advance in 2007 as subscription for 2008. Calculate income from subscription for the year 2008.
Answer:

Question 7.
How will you treat with the following items while preparing final accounts of a Non-profit organisation?
Trial Balance as on 31.12.2007

Answer:
Match Fund Investment and match fund bank balance – Rs. 95,000 and Rs. 4,500 will be shown on the assets side of the balance sheet. The match fund will be shown on the liability side of the Balance sheet as follows:
Match Fund – 1,00,000
Add Interest on match fund investments – 4,000
1,04,000
Less Match expenses – 4,500
Match Fund Balance – 99,500

Question 8.
How will you deal with the following items while preparing for Bombay Cricket Club, its Income and Expenditure A/c and the Balance sheet for 2008?

Answer:
Tournament Investments Rs. 25,000/- will be shown on the assets side of the balance sheet. The tournament fund will be shown on the liability side of the balance sheet as follows:

Question 9.
From the following information find out the total amount of subscription to be credited to Income and Expenditue A/c for the year ending 31.12.2004.

  • Subscription received during the year 2004 – 22,000
  • Subscription outstanding on 31.12.2003 – 1200
  • Subscription outstanding on 31/12/2004 – 2400
  • Subscription received in advance on 31.12.2004 – 2600.
  • Subscription received in advance on 01.01.2004 – 3200.

Answer:

Question 10.
From the following data, find out the total amount of rent to be debited for the Income and Expenditure Account for the year ending 31.12.2004.

Rs.
Rent paid during the year 2500
Rent outstanding on 31.12.2004 400
Rent paid in advance on 31.12.2004 300
Rent outstanding on 31.12.2003 250
Rent paid in advance on 31.12.2003 paid in advance on 31.12.2009 300

Answer:

Question 11.
How will you deal with the following items while preparing income and expenditure account for the year ending March 2016 in respect of XYZ Club:

Locker rent received during the year 2015 – 16 Rs. 75,000.
Answer:

Question 12.
Show how will you deal with the following items in the final accounts of a not-for-profit organisation?

Prize Fund 80000
Interest of Prize fund investment 6000
Prize given 10000
Prize Fund investment 60000
Donation for prize fund 25000

Answer:
Balance Sheet:

Plus Two Accountancy Accounting for Not For Profit Organisation Five Mark Questions and Answers

Question 1.
Define a not-for-profit organisation and mention its features.
Answer:
Not-for-profit organisation is an entity intended to render services to the members of the public without any intention of profit”
eg: sports and arts club, Hospitals, Libraries charitable institutions, etc.
Features:

  1. Their main objective is to render services to members and to the public.
  2. They are not expected to earn profit.
  3. They donot normally engage in trading activities.
  4. Credit transactions are not usually made.
  5. Such concerns keep only cash book to record daily transactions.
  6. They prepare a summary of cash book at the end called Receipts and payments A/c.
  7. No trial balance is prepared.
  8. Do not prepare trading, profit and loss A/c, but prepare Income and Expenditure A/c.

Question 2.
What are the steps involved in the preparation of Receipts and payment Account?
Answer:
Procedure for preparation of Receipts and payments account as follows.
1. This account always starts with opening balance of cash in hand and cash at bank, cash in hand always has a debit balance and hence appears on the debit side as the first item. Cash at bank has either a debit balance or a credit balance (overdraft).

2. All receipts made in cash during the accounting year will be shown on the debit side and all cash payments made during the accounting year are shown on the credit side.

3. Only actual cash receipts and cash payments are recorded in this account.

4. At end of the accounting period, this account is balanced and it shows the closing balance of cash in hand and at bank or bank overdraft, as the case may be.

Question 3.
From the following Receipts and Payment account, show subscription to be shown in Income and Expenditure Account for the year ending 31.03.2010 and relevant item in the Balance Sheet as at 31.03.2010.
Receipts and Payments Account (an extract) (for the year ended 31.03.2010)

The charitable trust has 1000 members each paying Rs.200 as annual subscription. Outstanding subscription as on 31.03.2009 was Rs. 27000/-.
Answer:
Subscription A/c:

Balance sheet as on 31.03.2010:

Question 4.
The following is the Receipts and Payments A/c of Neelgiri club for the year ended 31.12.2007.
Receipts and Payments Account:

The club has 100 members each paying an annual subscription of Rs.100. On 1.1.2007, Stock of stationery was for Rs. 75 and 31.12.07 stock is valued at Rs.125. On 1.1.2007, furniture was valued at Rs. 5,000. Provide depreciation on furniture @ 20% p.a.Prepare Income and Expenditure A/c for the year ended 31.12.2007.
Answer:
Income and Expenditure Account for the year ended 31.12.2007

Question 5.
Mention the difference between receipts and payment account and Income and Expenditure Account.
Answer:

Receipts and payment A/c Income & Expenditure A/c
1. It is a real account 1. It is a nominal account
2. It is a summary of cash book 2. It is like a profit and Loss A/c
3. Its debit side shows receipts and credit side shows payments 3. Debit side shows expenses and credit side shows income and gians.
4. It starts with an opening balance of cash/bank 4. It does not start with cash/ bank balance
5. It records both revenue and capital items 5. It records only revenue items.
6. Adjustments are not made 6. Adjustments are made
7. objective is to ascertain the balance of cash in hand or cash at bank 7. Objective is for knowing surplus or deficit.
8. Its closing balance is carried to the succeeding year 8. Its balance is transferred to capital fund.
9. Includes receipts and payments for current year, previous year and next year. 9. Includes items relating to current year only.
10. lt is prepared on cash system 10. It is prepared as mercantile system

Question 6.
What are the steps involved in the preparation of income and Expenditure Account?
Answer:
While preparing an Income and Expenditure account, the following points are to be considered.

  1. This account is prepared usually in “T” form taking revenue expenses on the debit side and the revenue incomes on the credit side.
  2. It is also prepared in vertical form. Under this method, the total of revenue incomes are shown first, revenue expenses follow it. After this, the total of expenses is deducted from the total of the incomes for ascertaining the surplus or deficit.
  3. It is prepared to find out the current year’s surplus or deficit, it does not have any opening balance. Therefore, previous year’s surplus or deficit is not important.
  4. This account takes only the revenue incomes and revenue expenses. Capital receipts and payments are not taken into account.
  5. Since it is maintained under accrual basis, current year’s income and expenditures alone are shown.
  6. Outstanding expenses, accrued incomes, prepaid expenses, income received in advance, depreciation, provision, etc. in the current year are to be suitably adjusted.
  7. At the end of the accounting year the income and expenditure account is balanced and it reflects either a surplus or a deficit which is transferred to capital fund.

Question 7.
Explain the treatment of the following items by a not- for-profit organisation:

  1. Donation
  2. Legacies
  3. Life membership
  4. Endowment fund

Answer:
1. Donation:
Donation appears on the receipt side of the receipts and payment Account. Donation can be for specific purposes or for general purposes.

Specific Donation:
If donation received is to be utilised to achieve specified purpose, it is called specific donation. The specific purpose donation is to be capitalised and shown on the liabilities side of the balance sheet irrespective of the fact whetherthe amount is big or small.

General Donation:
Donations are to be utilised to promote the general purpose of the organisation, it is called general donation. These are treated as revenue receipts as it is a regular source of income, hence it is taken to income side of the income and expenditure account of the current year.

2. Legacies:
The amount received by a non-profit organisation as perthe will of a deceased person is called legacy. It appears on the receipts side of the Receipt and Payment Account and is directly added to capital found or general fund in the balance sheet. If the legacies of a small amount may be treated as income and shown on the income side of the income and expenditure account.

3. Life membership:
Fees some members prefer to pay lumpsum amount as life membership fee instead of paying periodic subscription. Such amount is treated as capital receipt and credited directly to the capital fund or general fund.

4. Endowment fund:
It is a capital receipt and shown on the liabilities side of the Balance sheet as an item of a specific purpose fund.

Question 8.
How will you treat the following items by a not-for-profit organisation?

  1. Sale of periodicals
  2. Payment of Honorarium
  3. Special fund
  4. Government Grant

Answer:
1. Sale of Periodicals:
It is an item of recurring nature and shown as the income side of the income and expenditure a/c.

2. Payment of Honorarium:
It is the amount paid to the person who is not the regular employee of the institution. This amount is shown on the expenditure side of the income and expenditure a/c.

3. Special fund:
The special fund such as prize fund, match fund, sports fund, etc. are invested in securities and income from such investment is added to the respective fund and the expenses incurred on such specific purposes are deducted from the specific fund. Special funds are shown on the liability side of the balance sheet.

4. Government fund:
The recurring grants (maintenance grant) by the government is treated as revenue receipt (income) and credited to income and expenditure a/c. Grants such as building grant are treated as capital receipt.

Plus Two Accountancy Accounting for Not For Profit Organisation Eight Mark Questions and Answers

Question 1.
From the following Receipts and payments Accounts and additional information relating to Soorya Arts Club, prepare Income and Expenditure Account forthe year ending 31.03.2006 and a Balance Sheet on that date.
Receipts and Payments Account For the year ending 31.3.2006

Additional Informations:

  1. Depreciation on furniture at 10% p.a.
  2. On 31.3.2006 locker rent receivable was Rs.60, outstanding wages was Rs. 150, and Rs. 500 due for subscriptions.
  3. On 1.4.2005 the club owned furniture worth Rs. 2,000 and subscription in arrears on that date was Rs. 400.
  4. 75% of the entrance fee should be capitalised

Answer:
Income and Expenditure Account for the year ended 31.03.2006:

Note: Subscription = 4000 + 500 = 4500
Depreciation = 1000 × 10/100 × 6/12 + 2000 × 10/100 = 250
Interest on investment = 6000 × 10/100 × 9/12 = 450
Balance sheet as at 1.4.2005:

Balance Sheet as on 31/03/2006:

Question 2.
The following is the Receipts and Payments A/c of the Lions Club for the year ended 31.3.2005.

Additional Informations:

  1. Salaries and wages outstanding Rs. 450, the figures on 1.4.2004 being Rs. 270.
  2. Miscellaneous expenses outstanding on 31.3.2005 amounts to Rs. 720 and paid in advance on 1.4.2004 amounted to Rs. 110.
  3. Subscription outstanding on 1.4.2004 were Rs. 600, subscription outstanding forthe current year amounts to Rs. 900 as on 31.3.2005.
  4. On 1.4.2004, there was furniture with a book value of Rs. 5,000 and is subject to a depreciation of 10%. Prepare Income and Expenditure Account for the year ended 31.3.2005 and a Balance sheet as on that date.

Answer:
Income and Expenditure a/c for the year ended 31/03/05:

Balance Sheet as on 1.4.2004:

Balance Sheet as on 31.3.2005:

Question 3.
The Income and Expenditure Account of Adithya Club for the year ending 31.12.2006 is given below.
Income and Expenditure Account for the year ending 31.12.2006

The accounts has been prepared after the following adjustments.

The club owned a building since 2005 Rs. 20,000. On 31.12.2005 the club had furniture worth Rs. 1000. At the end of the year 2006, the firm had furniture worth Rs. 1,800 after providing depreciation. Cash in hand on 31.12.2006 is Rs. 15,500.

You are required to prepare receipts and payments account of the club for 2006 and the Balance sheet as on 31.12.2006.
Answer:
Receipts and payments account for the year ended 31.12.2006


Balance sheet as on 1.1.2006

Balance sheet as on 31.12.2006

Furniture Account

Question 4.
Following is the receipt and payment Account of central club in respect of the year 31.03.2016.
Receipt and Payment Account for the year ending 31.3.2016

Additional Information:

  1. There are 500 members, each paying an annual subscription of Rs. 50, Rs. 17500 being in arrears for 2014-2015 at the beginning of 2015-2016. During 2014-2015, subscriptions were paid in advance by 40 members for 2015-2016.
  2. Stock of stationary at 31/3/2015, was Rs.1500 and 31/3/2016 Rs. 2000.
  3. At 31/3/2016, the rates and taxes were prepaid to the following January 31, the annual charge being Rs.1500.
  4. A quarter’s charge for telephone is outstanding, the amount accrued being Rs.1500. There is no change in quarterly charge.
  5. Sundry expenses accruing at 31.3.2015 were rs. 250 and at march 31,2016 Rs.300.
  6. At march 31,2015 Building stood in the books at Rs. 2,00,000 and it is required to write off depreciation @ 10% p.a.
  7. Value of 8% Govt, securities at march 31,2015 was Rs. 75,000 which were purchased at that date at par. Additional Govt, securities worth Rs. 25,000 are purchased on 31/3/2016.

You are required to prepare:

  • An income and expenditure Account for the year ended 31/3/2016
  • A balance sheet on the date.

Answer:
Income and Expenditure Account for the year ending on 31/3/2016

Balance sheet as on 31/3/2015

Balance sheet as on 31/3/2016


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Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts Question and Answers PDF Download

Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts Question and Answers PDF Download: Students of Standard 12 can now download Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts question and answers pdf from the links provided below in this article. Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts Question and Answer pdf will help the students prepare thoroughly for the upcoming Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts exams.


Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts Question and Answers

Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts question and answers consists of questions asked in the previous exams along with the solutions for each question. To help them get a grasp of chapters, frequent practice is vital. Practising these questions and answers regularly will help the reading and writing skills of students. Moreover, they will get an idea on how to answer the questions during examinations. So, let them solve Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts questions and answers to help them secure good marks in class tests and exams.


Board

Kerala Board

Study Materials

Question and Answers

For Year

2021

Class

12

Subject

Accountancy

Chapters

Accountancy Chapter 2 Accounting for Partnership-Basic Concepts

Format

PDF

Provider

Spandanam Blog


How to check Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts Question and Answers?

  1. Visit our website - https://spandanamblog.com
  2. Click on the 'Plus Two Question and Answers'.
  3. Look for your 'Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts Question and Answers'.
  4. Now download or read the 'Class 12 Accountancy Chapter 2 Accounting for Partnership-Basic Concepts Question and Answers'.

Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts Question and Answers PDF Download

We have provided below the question and answers of Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts study material which can be downloaded by you for free. These Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts Question and answers will contain important questions and answers and have been designed based on the latest Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts, books and syllabus. You can click on the links below to download the Plus Two Accountancy Chapter 2 Accounting for Partnership-Basic Concepts Question and Answers PDF. 

Question 1.
A partner is entitled to get 6% per annum as
(a) Profit
(b) Interest on capital
(c) Interest on loan
(d) Remuneration
Answer:
(c) Interest on loan

Question 2.
Profit and Loss Appropriation is an extension of
(a) Capital Account
(b) Current Account
(c) Trading Account
(d) Profit and Loss Account
Answer:
(d) Profit and Loss Account

Question 3.
Find odd one and state the reason
(a) Interest on capital
(b) Interest on drawings
(c) Salary
(d) Commission
Answer:
(b) Interest on drawings

Question 4.
Complete the following

  • Interest on loan – Charge against profit.
  • Interest on Partners capital – _______.

Answer:

  • Appropriation of profit
  • Reason: All others are increase to capital A/c.

Question 5.
Find the odd one and state reason.
(a) Interest on partner’s capital
(b) Interest on partner’s loan.
(c) Interest on partner’s drawings
(d) Borrowings from the firm
Answer:
(d) Borrowings from the firm. Others are P/L appropriation A/c items.

Question 6.
Rugma, Neha and Lekshmi are partners in a firm sharing profits and loses in the ratio of 3:3:4. Their fixed capitals were Rs. 1,00,000, Rs. 2,00,000 and Rs. 3,00,000 respectively. For the year 2005, interest on capital was credited to them @ 10% instead of 9% per annum. You are required to rectify the mistake by passing an adjustment entry.
Answer:

Plus Two Accountancy Accounting for Partnership – Basic Concepts Two Mark Questions and Answers

Question 1.
Define Partnership.
Answer:
According to Section 4 of the Indian Partnership Act 1932, a partnership is “the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all”. The persons entered into agreement are individually known as ‘partners’ and collectively as ‘firm’.

Question 2.
What is Partnership Deed?
Answer:
Partnership agreement may be oral or written. When the agreement is written, it is called Partnership Deed. It is also called ‘Articles of Partnership’.

Question 3.
What is meant by Profit and Loss Appropriation Account?
Answer:
Profit and Loss Appropriation Account is an extension of the Profit and Loss Account. It is prepared to show the appropriation (distribution) of profit among partners.

Question 4.
What are the circumstances in which goodwill is need to be valued?
Answer:

  1. When a new partner is admitted.
  2. When a partner is retired ordied.
  3. When two or more firms are amalgamated.
  4. When a firm is dissolved or its business is sold.

Question 5.
What is divisible profit?
Answer:
Divisible profit is the balance net profit that remains after making all adjustments to net profit regarding interest on capital, salary to partners, interest on partners loan, interest on drawings, etc. and which is distributed among partners in their profit sharing ratio.

Question 6.
Edwin and Abel are partners sharing profits and losses in the ratio of 1:1. Edwin drew Rs. 1000/- at the beginning of every month for the year ending 31st Dec. 2004. Calculate interest on drawings at 6% perannum.
Answer:
Total amount withdrawn by Edwin = 1,000 × 12 = 12,000
1,000 × 12 = 12,000
\(Average period =\frac{\text { Total period (months) }+1}{2}\)
\(=\frac{12+1}{2}\) = 6 : 5 months
Interest on drawings = 12,000 × 6/100 × 6.5/12 = Rs. 390.

Question 7.
Christy and Fiyona are partners in a firm with equal profit sharing ratio. Christy drew regularly Rs. 15000 at the end of every month.
Answer:
Total amount withdrawn by Christy = Rs. 1,500 × 2 = 18,000
\(Average period =\frac{\text { Total period (months) }-1}{2}\)
\(=\frac{12-1}{2}\) = 5.5 months
Interest ondrawings= 18, 000 × 5/100 × 5.5/12 = Rs. 412.5

Question 8.
After closing the books of accounts, it was discovered that an item, interest on capital was omitted to be recorded in the books of accounts. Even then, there was no difference in the closing balance of capital account, before and after the treatment of the item. What do you infer from this?
Answer:
Partner’s Share of Capital and their profit sharing ratio are in accordance with their capital account balances.

Question 9.
Paul, Kumar, and Lakshman are partners in a firm, sharing profits and losses in the ratio of 3:2:1. After the preparation of final accounts, it was discovered that interest on drawing had not been taken into consideration. The interest on drawings of partners amounted to Rs. 600, Rs. 400 and Rs. 200. Give necessary adjustment journal entry.
Answer:
Items which are omitted while preparing P&L Appropriation A/c can be brought into accounts through P&L adjustment a/c by passing the following entry.

Paul’s capital Dr. 600
Kumar’s capital Dr. 400
Lakshman’s capital Dr. 200
To P&L Adjustment A/c 1,200

Question 10.
Give your suggestions to the following arguments. “Under capitalisation method, the firm will have good will only if the value of net tangible assets are more than the capitalised value of profit.”
Answer:
Under capitalisation method
Value of goodwill = Total value of business – Net as-sets
Total value of business

Net assets = Assets – Liabilities The above equation proves that, a firm will have goodwill only if the value of net tangible assets are less than the capitalised value of profit.

Question 11.
Sanu and Manu are in partnership, who have not made any written agreement. Sanu has given a loan of Rs. 12,000/- to the firm in addition to his capital contribution. During the year the firm made a net loss of Rs. 40,000. Regarding the interest on loan, Manu is of the opinion that no interest be paid being the loan was not external one. Is Mr.Manu right in his stand? State your views.
Answer:
Normally partnership deed contains rules and regulations regarding the conduct of partnership business. In such cases partnership may not have a written agreement. In some other firms, partnership deed may be silent on some matter.

Then relevant discussion in the IPA 1932 becomes applicable. As per IPA 1932, interest on loan is payable at 6% p.a. on Partner’s loan. So Manu’s opinion that interest on loan is not payable, is wrong.

Question 12.
A business has been purchased by a firm for Rs. 1,00,000. But its net tangible assets were worth Rs. 92,000.

  1. What does this difference in value indicate?
  2. Where is it shown in the Balance sheet of the firm?

Answer:
Total value of business-Net Assets = Value of goodwill 1,00,000 – 92,000 = 8,000
So ‘Rs. 8000’ implies the value of goodwill of the firm. Goodwill refers to the value of reputation of a business. It is an intangible asset. So it is shown on the asset side of B/S.

Plus Two Accountancy Accounting for Partnership – Basic Concepts Three Mark Questions and Answers

Question 1.
Match the following.

a. Partnership deed Maximum 10 partners
b. Banking business If no partnership deed
c. Profit and losses shared equally Written agreement of partners
d. Registration of partnership Fixed capital Method
e. Current A/c Not compulsory

Answer:

a. Partnership deed Written agreement of partners
b. Banking business Maximum 10 partners
c. Profit and losses shared equally If no partnership deed
d. Registration of partnership Not compulsory
e. Current A/c Fixed capital Method

Question 2.
Ameer and Sudheer are partners sharing profits equally. They are entitled to salaries as follows, Ameer Rs. 6000, Sudheer Rs.4000. The partnership has made a profit of Rs. 15,000. How much is the increase in capital of Mr.Ameer?
(a) 3500
(b) 3900
(c) 8500
(d) 9300
Answer:
(c) 8500
Notes: A:S = 1:1
A’s salary 6000
S’s salary 4000
Out of Net profit of Rs. 15,000.
P/L Appropriation A/c:

A will get salary 6000 and share of profit 2500. So increase in capital is Rs. 8500.

Question 3.
Gomez and Arun Gomez are partners sharing profits and losses in the ratio of 2:1. They are allowed interest at 10% per annum on capitals and loans to the partnership.

The partnership has made a net profit of Rs. 40,000 for the year. How much is the total increase in the net worth of A.Gomez?
(a) 24,800
(b) 25,000
(c) 26,800
(d) 27,100
Answer:
(c) 26,800
Notes:
Capital A/c of A.Gomez:

P/L Appropriation A/c:

A Gomez’s opening capital (capital in the begining of the year) is Rs. 20,000 and closing capital (capital at the end of the year) is Rs. 46,800. So total increase in the net worth of A.Gomez is Rs. 26,800. (46,800-20,000).

Question 4.
Lalu and Beena are in partnership. He is also entitled to a salary of Rs. 12,000 per annum. Profits and losses are shared equally. The partnership has made a net profit of Rs. 30,000. How much is Lalu’s total increase in his Capital A/c?
(a) 18,000
(b) 15,000
(c) 21,000
(d) 42,000
Answer:
(c) 21,000
Notes: P&L Appropriation A/c:

Lalu’s capital A/c:

Increase in capital = 12000 + 9000 = 21000.

Question 5.
“Partnership deed must be in writing.” Do you agree with the statement? Give reasons in favour of having partnership deed in writing.
Answer:
Partnership is the result of agreement between two or more persons. The agreement may be oral or written. The written agreement is called Partnership Deed. It is always advisable to put the partnership agreement in writing because of the reasons given below:

  1. To avoid disputes, quarrels, and misunderstanding among the partners.
  2. To remind the partners about their rights, duties, and liabilities.
  3. To maintain healthy atmosphere to carry on business smoothly.

Question 6.
X, Y, and Z are partners in a firm sharing profits and losses in the ratio of 4:3:2. During 2005, their fixed capital and drawings were as follows:

Partners are entitled to a salary of Rs. 12,000 p.a. and interest on capital @ 5% p.a. You are required to prepare the Current Accounts of partners.
Answer:
Current Account:

Plus Two Accountancy Accounting for Partnership – Basic Concepts Five Mark Questions and Answers

Question 1.
Define Partnership Deed. Mention some of its contents.
Answer:
Partnership deed is a written document which contains the rules and regulations regarding the conduct of business.
Contents of Partnership deed:

  1. Name and address of the firm.
  2. Name and Address of partners
  3. Nature of business
  4. Duration of partnership
  5. Capital introduced by partners
  6. Interest on capital
  7. Drawing made by partner
  8. Interest on partner drawings
  9. Salary, commission and other remunerations payable to partners
  10. Rights, Duties, and Liabilities of Partners.

Question 2.
What are the rules applicable as per the Partnership Act in the absence of an agreement?
Answer:
In India Partnerships are governed by the Indian Partnership Act 1932. The following are the rules applicable as per the Partnership Act in the absence of an agreement.

  1. Profits and Losses – Profits and losses are to be shared equally among partners.
  2. Salary or remuneration – Partners are not entitled to salary or any other remuneration.
  3. Interest on capital- Partners are not entitled to interest on capital.
  4. Interest on drawings – No interest is charged on drawings made by partners.
  5. Interest on loan – partners are entitled to get an interest at 6% per annum for any loans they have given to the firm.

Question 3.
Distinguish between Fluctuating and Fixed Capital methods.
Answer:

Question 4.
What are the general characteristics/ features of a partnership? Explain.
Answer:
1. Number of members:
The minimum member of persons required for a partnership is two (2). Maximum number is ten (10) in case of banking business and twenty (20) in other partnerships.

2. Business Purpose:
The purpose of forming a partnership should be to carry out some business. The business must not be illegal.

3. Agreement:
For the formation of a partnership an agreement is must. The agreement may be oral or written. Only competent persons can enter into a partnership agreement.

4. Profit sharing:
The profits and losses of a partnership business must be shared among the partners. Profits must be shared in an agreed ratio or equally.

5. Mutual agency:
Mutual agency is there in partnership. Every partner is an agent and a principal at a time. He is an agent when he acts for others and a principal when the others act for him.

6. Unlimited liability:
The liability of the partners in a firm is unlimited. Every partner is individually and jointly liable for all the debts of the firm.

7. No legal existence:
A partnership has no legal existence. It has no existence different from its members.

8. No transfer of share:
A partner cannot transfer his share in the firm to outsiders without the consent of the other partners.

Question 5.
Sabu and Sekhar commenced business in partnership on 1st January, 2005. No written agreement was in force between them. They contributed Rs. 40,000 and Rs. 10,000 respectively as capital. In addition, Sabu advanced Rs. 20,000 on 1st July, 2005 as loan to the firm. Sabu met with an accident on 1st April, 2005 and could not attend the partnership business upto 30th June, 2005. The . profits for the year ended on 31stDecember, 2005 amounted to Rs. 50,600. Dispute arise between them for sharing profits.
Sabu claims:

  • He should get an interest @ 10% p.a. on capital. Sekhar claims:
  • Net Profit should be shared equally
  • He should be allowed remuneration of Rs. 1,000 p.m. during the period of Sabu’s illness.

You are required to:

  1. In your opinion how much profit will each partner get?
  2. State your reason.

Answer:
In the absence of agreement, partners are not entitled to interest on capital contributed by them. So Sabu’s claim is not admitted.

  1. In the absense of agreement, partners are not entitled to any salary or other remuneration.
  2. In the absence of written agreement, partners are entitled to share profits equally, Here, net profit is divided equally among Sabu and Sekhar.

Profit for the year = 50,600
Less:Interest on Sabus loan (20000 × 6/100 × 6/12) = 600
The actual profit = 50,000
In the absence of agreement, partners are entitled to interest on loan (to the firm) at the rate of 6% p.a. Sabu’s share of profit = 50,000 × 1/2 = 25000
Stephen’s share of profit = 50000 × 1/2 = 25000.

Question 6.
Sona and Jerin started a partnership business on 1st January 2004. Sona contributed Rs. 50,000 and Jerin Rs. 25,000 as capital. They decided to share profits and losses in the ratio of 2:1. Sona was entitled to a salary of Rs. 2000 per month. Partners are entitled to interest on their capitals at 5% per annum. The drawings of Sona and Jerin during the year are Rs. 9,000 and Rs. 6,000 respectively. The profit of the firm after making all the adjustment was Rs. 15,000. Prepare the capital accounts of the partners under fluctuating capital method.
Answer:
Partners Capital Account:

Question 7.
A and B are partners sharing profits in the ratio of 2: 3. On 1st January 2001, they admitted C into the firm for a sixth share of profits with a guaranteed minimum of Rs. 25000. A & B continue to share profits as before but agrees to suffer any excess over 1/6 of profit going to C equally. The profits of the firm for the year was Rs. 75,000. Prepare Profit and Loss appropriation account.
Answer:
Notes:

The ratio in which this difference is to be borne 1: 1 (equally)
Dr. Profit and Loss Appropriation Account Cr.

Question 8.
From the following Balance Sheet of Aneesh and Jaya, calculate interest on capital @ 5% per annum, payable to Jaya for the year ending 31.12.05.
Balance Sheet as on 31.12.2005:

During the year, Jaya’s drawings were Rs. 3,000 and the firm made a profit of Rs. 4,000.
Answer:
Interest on capital is payable on the opening capital (ie. capital on 1.1.05)
Opening capital = Closing capital + drawings – Net Profit
Closing capital = Rs. 6000
Drawings = 3000
Net Profit during the year = 4000
P&L appropriation shown in B/S = 2000
∴ Net profit credited to partners capital = 4000 – 2000 = 2000
Net profit credited to Jaya = 2000 × 1/2 (ratio being 1:1) = 1000
Opening capital = 6000 + 3000 – 1000 = 8000
Interest on capital = 8000 × 5/100 = 400.

Question 9.
Aby and Anu are partners sharing profits in the ratio of 4:1. Their capital a/c balances are
Aby : 4,00,000
Anu : 5,00,000
Profit made during the year was Rs. 1,00,000.
Anu is of the opinion that their agreement must include a provision for interest on capital @10% p.a. Otherwise the profit sharing ratio must be made equal. Why did Anu put forward such an opinion? Will it be worthwhile to her if such changes are made. Which of the above condition is more advantageous to her. Give your advice.
Answer:
Profit sharing ratio of Aby and Anu is 4:1.
Net Profit = 1,00,000
As per this ratio Aby will get Rs. 80,000 (1,00,000 × 4/5) and Anu will get 20,000 (1,00,000 × 1/5) as their share of profit. But Anu has contributed Rs. 1,00,000 more than Aby’s capital. Now Anu is in a disadvantageous position.
Conditions:
1. If there is a provision for interest on capital @10%.
Anu’s interest on capital = 5,00,000 × \(\frac{10}{100}\) = 50,000
Her share of profit = (Net Profit – Interest on capital of Aby and Anu) × 1/5
=[1,00,000 – (40,000 + 50,000)] × \(\frac{1}{5}\)
= 1,00,000 – 90,000 × 1/5
=10,000 × \(\frac{1}{5}\) = 2,000
Anu will get interest on capital = 50,000+ share of profit 2000 = 52,000.

2. Profit sharing ratio made equal:
Abu’s share of profit = 1,00,000 × 1/2 = 50,000
Anu’s share of profit = 1,00,000 × 1/2 = 50,000
So First condition is more advantageous to Anu.

Question 10.
The partner’s capital account prepared by Mr.Jose, an accountant in Gokul and Co, where Mr. Raman and Mrs.Seetha are partners, is given below. Rectify the errors, if any in the capital accounts prepared by him and show the partners capital accounts under fixed capital method. What should have been the profit of the firm as per profit and loss account?
Partners Capital A/c

Answer:
Calculation of NP:

Capital A/c:

Question 11.
T and S are partners with equal profit sharing ratio. T withdrew the following amounts during the year 2005.

31st January 2,000
31st March 1,500
30th April 2,000
31st May 2,500
30th Sept 1,000
30th Nov 1,500

The interest on drawings charted is at 6% p.a. Assuming that the accounting year ends on 31st December. Calculate the interest on drawings under product method.
Answer:
Calculation of Interest on Drawings:

Interest on drawings = 73,500 × 6/100 = Rs. 4,410
Interest for one month= 4,410 × 1/12 = Rs. 367.5.

Question 12.
On 1st January 2006, X&Y entered into a partnership contributing Rs. 60,000 and Rs. 40,000 respectively. They agreed to share profits & losses in a ratio of 3 : 2. Y is allowed a salary of Rs. 15,000 per year. Interest on capital is to be allowed at 10% per annum. During the year X withdrew Rs. 9,000 and Y Rs. 8,000 as drawings. The interest on drawings paid by X and Y was Rs.150 and Rs. 130 respectively. Profits as on 31st December 2006 before the above-mentioned adjustments were Rs. 65,000. Show the distribution of Profits by preparing Profit and Loss Appropriation A/c & Prepare Partner’s Capital Accounts.
Answer:
Profit and Loss Appropriation Account:

Capital A/c:

Plus Two Accountancy Accounting for Partnership – Basic Concepts Eight Mark Questions and Answers

Question 1.
On 1st January 2005 Sneha and Surya started partnership business by contributing capitals of Rs. 50,000 and Rs. 60,000 respectively. They share profits in the ratio of 2 : 3. Sneha is entitled to a salary of Rs. 12,000 per annum. Interest on capital allowed is at 6% p.a. Surya is entitled to a commission of Rs. 3,000. During this year Sneha withdrew Rs. 3,000 and Surya Rs. 2,000. Interest on drawings charged is Rs. 100 and Rs. 150 respectively. Profit in the year before making the adjustments was Rs. 25,000. Pass necessary journal entries, Prepare Profit and Loss Appropriation Account and Partners Capital Accounts.
Answer:
Journal:


Dr. Profit & Loss Appropriation Account Cr.

Dr. Partners Capital Account Cr.


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