{"id":9471,"date":"2018-02-12T12:21:49","date_gmt":"2018-02-12T06:51:49","guid":{"rendered":"http:\/\/mycbseguide.com\/blog\/?p=9471"},"modified":"2019-03-11T10:55:31","modified_gmt":"2019-03-11T05:25:31","slug":"accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy","status":"publish","type":"post","link":"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/","title":{"rendered":"Accounting for partnership firms fundamentals class 12 Notes Accountancy"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_76 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#CBSE_Guide_Accounting_for_partnership_firms_fundamentals_class_12_Notes_Accountancy\" >CBSE Guide Accounting for partnership firms fundamentals class 12 Notes Accountancy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Class_12_Accountancy_notes_Chapter_1_Accounting_for_partnership_firms_fundamentals\" >Class 12 Accountancy notes Chapter 1 Accounting for partnership firms fundamentals<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#CBSE_Class_12_Accountancy_Revision_Notes_Chapter_1_Accounting_for_partnership_firms_fundamentals\" >CBSE Class 12 Accountancy Revision Notes Chapter 1\u00a0Accounting for partnership firms fundamentals<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Features_of_Partnership\" >Features of Partnership<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Partnership_Deed\" >Partnership Deed<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#The_partnership_deed_is_a_written_agreement_among_the_partners_which_contains_the_terms_of_agreement_It_is_also_called_%E2%80%98_Articles_of_Partnership_A_partnership_deed_should_contain_the_following_points\" >The partnership deed is a written agreement among the partners which contains the terms of agreement. It is also called &#8216; Articles of Partnership&#8217;. A partnership deed should contain the following points:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Benefits_of_Partnership_Deed\" >Benefits of Partnership Deed<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Rules_applicable_in_the_absence_of_partnership_deed\" >Rules applicable in the absence of partnership deed<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Distribution_of_Profits_among_Partners\" >Distribution of Profits among Partners<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#The_Journal_Entries_regarding_Profit_and_Loss_Appropriation_Account_are_as_follows\" >The Journal Entries regarding Profit and Loss Appropriation Account are as follows:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#SPECIMEN_OF_PROFIT_AND_LOSS_APPROPRIATION_ACCOUNT\" >SPECIMEN OF PROFIT AND LOSS APPROPRIATION ACCOUNT<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Partners_Capital_Accounts\" >Partner\u2019s\u00a0Capital Accounts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Partners_Capital_ACs\" >Partner\u2019s Capital A\/Cs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Partners_Current_ACs\" >Partner\u2019s Current A\/Cs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Partners_Capital\" >Partner\u2019s Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#INTEREST_ON_CAPITAL\" >INTEREST ON CAPITAL<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#INTEREST_ON_DRAWINGS\" >INTEREST ON DRAWINGS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#SIMPLE_METHOD\" >SIMPLE METHOD<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#INTEREST_ON_PARTNERS_LOAN\" >INTEREST ON PARTNERS LOAN<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Statement_showing_adjustment\" >Statement showing adjustment<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#Accounting_for_partnership_firms_fundamentals_class_12_Notes_Accountancy\" >Accounting for partnership firms fundamentals class 12 Notes Accountancy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/#CBSE_Class_12_Revision_Notes_and_Key_Points\" >CBSE Class 12 Revision Notes and Key Points<\/a><\/li><\/ul><\/nav><\/div>\n<p><strong>CBSE Class 12 Accounting for partnership firms fundamentals<\/strong>\u00a0<strong>Accountancy<\/strong> in PDF are available for free download in myCBSEguide mobile app. The best app for CBSE students now provides accounting for partnership firm\u2019s fundamentals class 12 Notes latest chapter wise notes for quick preparation of CBSE board exams and school-based annual examinations. Class 12 Accountancy notes on chapter 1 accounting for partnership firms fundamentals are also available for download in CBSE Guide website.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"CBSE_Guide_Accounting_for_partnership_firms_fundamentals_class_12_Notes_Accountancy\"><\/span><strong>CBSE Guide Accounting for partnership firms fundamentals class 12 Notes Accountancy<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>CBSE guide notes are the comprehensive notes which covers the latest syllabus of CBSE and NCERT. It includes all the topics given in NCERT class 12 Accountancy text book. Users can download CBSE guide quick revision notes from myCBSEguide mobile app and my CBSE guide website.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Class_12_Accountancy_notes_Chapter_1_Accounting_for_partnership_firms_fundamentals\"><\/span><strong>Class 12 Accountancy notes Chapter 1 Accounting for partnership firms fundamentals<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Download CBSE class 12th revision notes for chapter 1 Accounting for partnership firms fundamentals in PDF format for free. Download revision notes for Accounting for partnership firms fundamentals class 12 Notes and score high in exams. These are the Accounting for partnership firms fundamentals class 12 Notes prepared by team of expert teachers. The revision notes help you revise the whole chapter 1 in minutes. Revision notes in exam days is one of the best tips recommended by teachers during exam days.<\/p>\n<p style=\"text-align: center;\"><strong><a class=\"button\" href=\"https:\/\/mycbseguide.com\/downloads\/cbse-class-12-accountancy\/1315\/cbse-revision-notes\/7\/\">Download Revision Notes as PDF<\/a><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"CBSE_Class_12_Accountancy_Revision_Notes_Chapter_1_Accounting_for_partnership_firms_fundamentals\"><\/span><strong>CBSE Class 12 Accountancy Revision Notes Chapter 1\u00a0Accounting for partnership firms fundamentals<br \/>\n<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>According to Section -4 of the Indian Partnership Act, 1932:<\/p>\n<p>\u201cPartnership is the relations between two or more persons who have agreed to share the profits of a business carried on by all or any one of them acting for all\u201d<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Features_of_Partnership\"><\/span><strong>Features of Partnership<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>1.<\/strong> <strong>Two or more persons: <\/strong>There must be at least two persons to form a valid partnership. The maximum number of partners cannot exceed the number of partners prescribed by Companies Act, 2013 which is 50 in any business whether banking or non- banking.<\/p>\n<p><strong>2.<\/strong> <strong>Agreement: <\/strong>Partnership comes into existence by an agreement (either written or oral among the partners. The written agreement among the partners is called Partnership Deed.<\/p>\n<p><strong>3.<\/strong> <strong>Existence of business and profit motive: <\/strong>A partnership can be formed for the purpose of carrying on legal business with the intention of earning profits. A joint ownership of some property by itself cannot be called a partnership.<\/p>\n<p><strong>4.<\/strong> <strong>Sharing of Profits: <\/strong>An agreement between the partners must be aimed at sharing the profits. If some persons join hands to run some charitable activity, it will not be called partnership. Futher, if a partner is deprived of his right to share the profits of the business, he cannot be called as partner.<\/p>\n<p><strong>5.<\/strong> <strong>Buiness carried on by all or any of them acting for all: <\/strong>It means that each partner can participate in the conduct of business and each partner is bound by the acts of other partners in respect to the business of the firm.<\/p>\n<p><strong>6.<\/strong> <strong>Relationship of Principal and Agent:<\/strong> Each partner is an agent ad well as a partner of the firm. An agent, because he can bind the other partners by his acts and principal, because he himself can be bound by the acts of the other partners.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Partnership_Deed\"><\/span><strong>Partnership Deed<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Since partnership is the outcome of an agreement, it is essential that there must be some terms and conditions agreed upon by all the partners. Such terms and conditions mat be either written or oral. The law does not make it compulsory to have a written agreement. However, in order to avoid all misunderstandings and disputes, it is always the best course to have a written agreement duly signed and registered under the Act.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_partnership_deed_is_a_written_agreement_among_the_partners_which_contains_the_terms_of_agreement_It_is_also_called_%E2%80%98_Articles_of_Partnership_A_partnership_deed_should_contain_the_following_points\"><\/span><strong>The partnership deed is a written agreement among the partners which contains the terms of agreement. It is also called &#8216; Articles of Partnership&#8217;. A partnership deed should contain the following points:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>Name and address of the firm as well as partners.<\/li>\n<li>Name and addresses of the partners.<\/li>\n<li>Nature and place of the business.<\/li>\n<li>Duration, if any of partnership.<\/li>\n<li>Capital contribution by each partner.<\/li>\n<li>Interest on capital.<\/li>\n<li>Drawings and interest on drawings.<\/li>\n<li>Profit sharing ratio.<\/li>\n<li>Interest on loan.<\/li>\n<li>Partner\u2019s Salary\/commission etc.<\/li>\n<li>Method for valuation of goodwill and assets.<\/li>\n<li>Accounting period of the firm and duration of partnership<\/li>\n<li>Rights and duties of partners how disputes will be settled.<\/li>\n<li>Decisions taken if some partner becomes insolvent.<\/li>\n<li>Opening of Bank Account \u2013 whereas it will be in the name of firm or partners.<\/li>\n<li>Rules to be followed in case of admission &amp; Settlement of accounts or retirement or death of partner.<\/li>\n<li>Revaluation of assets &amp; liabilities, if any to be done.<\/li>\n<li>Method of recording of firm&#8217;s accounts<\/li>\n<li>Auditing<\/li>\n<li>Date of commencement of partnership<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Benefits_of_Partnership_Deed\"><\/span><strong>Benefits of Partnership Deed<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>(1) It regulates the rights, duties and liabilites of each partner.<\/p>\n<p>(2) It helps to avoid any misunderstanding amongst the partners because all the terms and conditins of partnership have been laid down beforehand in the deed.<\/p>\n<p>(3) Any dispute amongst the partners may be settled easily as the partnership deed may be readiy referred to.<\/p>\n<p>Hence, it is always best course to have a written partnership deed duly signed by all the partners and registered under the Act.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Rules_applicable_in_the_absence_of_partnership_deed\"><\/span><strong>Rules applicable in the absence of partnership deed<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table class=\"mobile\" border=\"1\" width=\"828\" cellspacing=\"1\" cellpadding=\"3\">\n<tbody>\n<tr>\n<td style=\"text-align: center;\">Profit sharing Ratio<\/td>\n<td style=\"text-align: center;\">Equal, Irrespective of capital contribution.<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">Interest on Capital<\/td>\n<td style=\"text-align: center;\">No Interest on Capital is to be allowed to any Partner<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">Interest on Drawings<\/td>\n<td style=\"text-align: center;\">No interest on Drawings is to be charged to any partner<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">Salary or Commission to a Partner<\/td>\n<td style=\"text-align: center;\">Not allowed to any partner<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">Interest on loan by a Partner<\/td>\n<td style=\"text-align: center;\">Interest is allowed @ 6% per annum.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3><span class=\"ez-toc-section\" id=\"Distribution_of_Profits_among_Partners\"><\/span><strong>Distribution of Profits among Partners<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Transactiions of the partnerhsip firm are recorded according to the principles of Double-entry book keeping system, and as in the case of a sole proprietorship concern a partnership firm will also prepare Trading account, Profit &amp; Loss account and Balance Sheet at the end of every year. The only difference between accounting of a sole trader and partnership firm is that the profits of the partnership firm ar divided amongst the partners.<\/p>\n<p>A Profit and Loss Appropriation Account is prepared to show the distribution of profits among partners as per the provision of Partnership Deed (or as per the provision of Indian Partnership Act, 1932 in the absence of Partnership Deed). It is an extension of profit and Loss Account. It is nominal account. It records entries for interest on capital, Interest on Drawings, Salary to the partner, and division of profits among the partners.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_Journal_Entries_regarding_Profit_and_Loss_Appropriation_Account_are_as_follows\"><\/span><strong>The Journal Entries regarding Profit and Loss Appropriation Account are as follows:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>1.For transfer of balance of Profit and Loss Account<\/strong><\/p>\n<p>Profit and Loss A\/cDr.<\/p>\n<p>To Profit and Loss Appropriation A\/c<\/p>\n<p><strong>2.For Interest on Capital<\/strong><\/p>\n<p>For allowing Interest on capital<\/p>\n<p><strong>1.<\/strong> Interest on Capital A\/c<\/p>\n<p>To Partner\u2019s Capital\/Current A\/cs<\/p>\n<p>(Being interest on capital allowed @ % p.a.)<\/p>\n<p><strong>2.<\/strong> For transferring Interest on Capital to p&amp;L appropriation A\/c.<\/p>\n<p>Profit and Loss Appropriation A\/cDr.<\/p>\n<p>To Interest on Capital A\/c.<\/p>\n<p>(Being interest on capital transferred to p&amp;L Appropriation A\/c)<\/p>\n<p><strong>3. For Salary or Commission payable to a partner<\/strong><\/p>\n<p>i. For allowing Salary or Commission to a partner:<\/p>\n<p>Partners Salary\/Commission A\/cDr.<\/p>\n<p>To Partner\u2019s Capital\/Current A\/cs<\/p>\n<p>(Being salary\/commission payable to a partner)<\/p>\n<p>ii. For transferring Partner\u2019s Salary\/Commission A\/c to Profit and Loss<\/p>\n<p>Appropriation A\/s:<\/p>\n<p>Profit and Loss Appropriation A\/cDr.<\/p>\n<p>To Partner\u2019s Salary\/Commission A\/c<\/p>\n<p><strong>4. For transfer of Reserves:<\/strong><\/p>\n<p>Profit and Loss Appropriation A\/cDr.<\/p>\n<p>To Reserve A\/c<\/p>\n<p>(Being reserve created)<\/p>\n<p><strong>5. For Interest on Drawings:<\/strong><\/p>\n<p><strong>1.<\/strong>For charging interest on a partner\u2019s drawings:<\/p>\n<p>Partner\u2019s Capital\/Current A\/c.Dr.<\/p>\n<p>To Interest on Drawings A\/c<\/p>\n<p>(Being interest on drawings charged @ % p.a.)<\/p>\n<p><strong>2.<\/strong> For transferring interest on drawings to Profit and Loss Appropriation A\/c<\/p>\n<p>Interest on Drawings A\/cDr.<\/p>\n<p>To Profit and Loss Appropriation A\/c<\/p>\n<p>(Being interest on drawings transferred to P&amp;L appropriation A\/c)<\/p>\n<p><strong>6. For transfer to Profit (i.e. Credit Balance of Profit and Loss Appropriation Account<\/strong><\/p>\n<p>Profit and Loss Appropriation A\/cDr.<\/p>\n<p>To Partners Capital\/Current A\/cs<\/p>\n<p>(Being profits distributed among partners)<\/p>\n<h3><span class=\"ez-toc-section\" id=\"SPECIMEN_OF_PROFIT_AND_LOSS_APPROPRIATION_ACCOUNT\"><\/span><strong>SPECIMEN OF PROFIT AND LOSS APPROPRIATION ACCOUNT<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Profit and Loss Appropriation Account<\/strong><\/p>\n<p><strong>For the year ending on ___________________<\/strong><\/p>\n<table class=\"mobile\" border=\"1\" width=\"826\" cellspacing=\"1\" cellpadding=\"3\">\n<tbody>\n<tr>\n<td style=\"text-align: center;\">Particulars<\/td>\n<td>Rs.<\/td>\n<td style=\"text-align: center;\">Particulars<\/td>\n<td>Rs.<\/td>\n<\/tr>\n<tr>\n<td rowspan=\"2\">\n<p style=\"text-align: center;\">To Interest on Capital:<\/p>\n<p>A<\/p>\n<p>B<\/p>\n<p>To Partner\u2019s Salary\/Commission<\/p>\n<p>To Reserves<\/p>\n<p>To Profits transferred to capital A\/cs of:<\/p>\n<p>A<\/p>\n<p>B<\/td>\n<td><\/td>\n<td rowspan=\"2\">By Profit and Loss A\/c (Net Profits transferred from P &amp; L A\/c)<\/p>\n<p>By Interest on drawings:<\/p>\n<p>A<\/p>\n<p>B<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3><span class=\"ez-toc-section\" id=\"Partners_Capital_Accounts\"><\/span>Partner\u2019s<strong>\u00a0Capital Accounts<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><b>Partner\u2019s<\/b><strong>\u00a0Capital Accounts: <\/strong>It is an account which represents the partners interest in the business.<\/p>\n<p>In case of partnership business, a separate capital account is mainted for each partner. The capital accounts of partners may be maintained by any of the following two methods.<\/p>\n<p><strong>1.<\/strong> Fixed Capital Accounts<\/p>\n<p><strong>2.<\/strong> Fluctuating Capital Accounts<\/p>\n<p><strong>1. Fixed Capital Accounts <\/strong><\/p>\n<p>Under this method the original capitals invested by the partners remain constant, unless additional capital is introduced by an agreement. All entries relating to drawings, interest on capitals, interest on drawings, salary to partner, share of profits\/losses are made in separate account whihc is called as Current Account. Thus the following two accounts are maintained when capitals are fixed.<\/p>\n<p><strong>(i) Capital Account<\/strong><\/p>\n<p><strong>This account will always show a credit balance: <\/strong>Balance of Capital account remains fixed, it does not change every year that is why it is called fixed capital method and only the following two transactions are recorded in the Fixed Capital Accounts:<\/p>\n<p>Permanent\u00b7Additional Capital Introduced<\/p>\n<p>\u00b7Permanent Capital Withdrawn or Drawings out of Capital only<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Partners_Capital_ACs\"><\/span><strong>Partner\u2019s Capital A\/Cs<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table class=\"mobile\" border=\"1\" width=\"833\" cellspacing=\"1\" cellpadding=\"3\">\n<tbody>\n<tr>\n<td style=\"text-align: center;\">Particulars<\/td>\n<td>X(Rs.)<\/td>\n<td>Y(Rs.)<\/td>\n<td style=\"text-align: center;\">Particulars<\/td>\n<td style=\"text-align: center;\">X(Rs.)<\/td>\n<td style=\"text-align: center;\">Y(Rs.)<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" rowspan=\"2\">To Cash\/Bank A\/c<\/p>\n<p>(Capital Withdrawn)<\/p>\n<p>To Balance c\/d<\/p>\n<p>(Closing balance)<\/td>\n<td style=\"text-align: center;\"><\/td>\n<td style=\"text-align: center;\"><\/td>\n<td rowspan=\"2\">\n<p style=\"text-align: center;\">By Balance b\/d<\/p>\n<p style=\"text-align: center;\">(Opening Cr. Balance)<\/p>\n<p style=\"text-align: center;\">By Cash\/Bank A\/c<\/p>\n<p style=\"text-align: center;\">(Additional Capital Introduced)<\/p>\n<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>(ii) Current Account<\/strong><\/p>\n<p>The Current account may show a debit or credit balance. All the usual adjustments such as interest on Capital, partner\u2019s salary\/commission, drawings (out of profits), interest on drawings and share in profits or losses etc. are recorded in this account.All the Current Year&#8217;s adjustments are recorded in this account, that is why it is called Current account.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Partners_Current_ACs\"><\/span><strong>Partner\u2019s Current A\/Cs<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table class=\"mobile\" border=\"1\" width=\"831\" cellspacing=\"1\" cellpadding=\"3\">\n<tbody>\n<tr>\n<td style=\"text-align: center;\">Particulars<\/td>\n<td style=\"text-align: center;\">X(Rs.)<\/td>\n<td style=\"text-align: center;\">Y(Rs.)<\/td>\n<td style=\"text-align: center;\">Particulars<\/td>\n<td style=\"text-align: center;\">X(Rs.)<\/td>\n<td style=\"text-align: center;\">Y(Rs.)<\/td>\n<\/tr>\n<tr>\n<td rowspan=\"2\">\n<p style=\"text-align: center;\">To Balance b\/d<\/p>\n<p style=\"text-align: center;\">(Opening Dr. Balance)<\/p>\n<p style=\"text-align: center;\">To Drawings<\/p>\n<p style=\"text-align: center;\">(out of Profits)<\/p>\n<p style=\"text-align: center;\">To Interest on Drawings<\/p>\n<p style=\"text-align: center;\">To Profit and Loss A\/c<\/p>\n<p style=\"text-align: center;\">(Share in losses)<\/p>\n<p style=\"text-align: center;\">To Balance c\/d<\/p>\n<p style=\"text-align: center;\">(Closing credit Balance)<\/p>\n<\/td>\n<td><\/td>\n<td><\/td>\n<td rowspan=\"2\">\n<p style=\"text-align: center;\">By Balance b\/d<\/p>\n<p style=\"text-align: center;\">(Opening Cr. Balance)<\/p>\n<p style=\"text-align: center;\">By Interest on Capital<\/p>\n<p style=\"text-align: center;\">By Partner\u2019s Salary or Commission<\/p>\n<p style=\"text-align: center;\">By Profit and Loss<\/p>\n<p style=\"text-align: center;\">Appropriation A\/c<\/p>\n<p style=\"text-align: center;\">(Share in Profits)<\/p>\n<p style=\"text-align: center;\">By Balance c\/d<\/p>\n<p style=\"text-align: center;\">(Closing Dr. Balance)<\/p>\n<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Note :<\/strong><\/p>\n<p><strong>1.<\/strong> Debit balance of Current Account is shown in Assets side of Balance Sheet.<\/p>\n<p><strong>2.<\/strong> Credits balance of Current Account A\/c is shown in Liabilities side of balance Sheet.<\/p>\n<p><strong>3.<\/strong> Balance of Fixed Capital Accounts are always shown in Liabilities side of Balance Sheet as it will be always be credit balance.<\/p>\n<p><strong>2. Fluctuating Capital Accounts<\/strong><\/p>\n<p>In this method only one account i.e., Capital Account of each and every partner is prepared and all the adjustment such as interest on capital interest on drawings etc, are recorded in this account under this method, Capital account may show a debit or credit balance and the balance of this account changes frequently from time to time therefore it is called fluctuating Capital Account.In this method the capitals are not fixed. <strong>In the absence of information, the Capital Accounts should be prepared by this method.<\/strong><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Partners_Capital\"><\/span><strong>Partner\u2019s Capital<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table border=\"1\" width=\"829\" cellspacing=\"1\" cellpadding=\"3\">\n<tbody>\n<tr>\n<td style=\"text-align: center;\">Particulars<\/td>\n<td style=\"text-align: center;\">X(Rs.)<\/td>\n<td style=\"text-align: center;\">Y(Rs.)<\/td>\n<td style=\"text-align: center;\">Particulars<\/td>\n<td style=\"text-align: center;\">X(Rs.)<\/td>\n<td style=\"text-align: center;\">Y(Rs.)<\/td>\n<\/tr>\n<tr>\n<td rowspan=\"2\">\n<p style=\"text-align: center;\">To Balance b\/d<\/p>\n<p style=\"text-align: center;\">(Opening Dr. Balance)<\/p>\n<p style=\"text-align: center;\">To Cash\/Bank A\/c<\/p>\n<p style=\"text-align: center;\">(Capital Withdrawn)<\/p>\n<p style=\"text-align: center;\">To Drawings<\/p>\n<p style=\"text-align: center;\">(out of profits)<\/p>\n<p style=\"text-align: center;\">To Interest on Drawings<\/p>\n<p style=\"text-align: center;\">To Profit and Loss A\/c<\/p>\n<p style=\"text-align: center;\">(Share in losses)<\/p>\n<p style=\"text-align: center;\">To Balance c\/d<\/p>\n<p style=\"text-align: center;\">(Closing credit Balance)<\/p>\n<\/td>\n<td><\/td>\n<td><\/td>\n<td rowspan=\"2\">\n<p style=\"text-align: center;\">By Balance b\/d<\/p>\n<p style=\"text-align: center;\">(Opening Cr. Balance)<\/p>\n<p style=\"text-align: center;\">By Cash\/Bank A\/c<\/p>\n<p style=\"text-align: center;\">(Additional Capital Introduced)<\/p>\n<p style=\"text-align: center;\">By Interest on Capital<\/p>\n<p style=\"text-align: center;\">By Partner\u2019s Salary or Commission<\/p>\n<p style=\"text-align: center;\">By Profit and Loss<\/p>\n<p style=\"text-align: center;\">Appropriation A\/c<\/p>\n<p style=\"text-align: center;\">(Share in Profits)<\/p>\n<p style=\"text-align: center;\">By Balance c\/d<\/p>\n<p style=\"text-align: center;\">(Closing Dr. Balance)<\/p>\n<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3><span class=\"ez-toc-section\" id=\"INTEREST_ON_CAPITAL\"><\/span><strong>INTEREST ON CAPITAL<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Interest on partners capital will be allowed only when it has been specifically mentioned in the partnership deed. If interest on capital is to be allowed as per the agreement, it should be calculated with respect to the time, rate of interest and the amount of capital. Interest on Capital can be treated as either:<\/p>\n<p>a. An Appropriation of profit; or<\/p>\n<p>b. A charge against profit.<\/p>\n<p><strong>A. Interest on Capital: An Appropriation of Profits:<\/strong><\/p>\n<table class=\"mobile\" border=\"1\" cellspacing=\"1\" cellpadding=\"3\">\n<tbody>\n<tr>\n<td>In\u00a0 case of Losses<\/td>\n<td>Interest on Capital is NOT ALLOWED<\/td>\n<\/tr>\n<tr>\n<td>In cases of Sufficient Profits<\/td>\n<td>Interest on Capital is ALLOWED IN FULL<\/td>\n<\/tr>\n<tr>\n<td>In\u00a0 case of Insufficient Profits<\/td>\n<td>Interest will be restricted to the amount of profit. Hence, profit will be distributed in the ratio of interest on capital of each partner.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>B. Interest on Capital: As a Charge against Profits:<\/strong><\/p>\n<p>Interest on Capital is always allowed in full irrespective of amount of profits of losses.<\/p>\n<p><strong>Note:<\/strong><\/p>\n<p><strong>Interest on Capital is always calculated on the OPENING CAPITAL.<\/strong><\/p>\n<p>Il\u2019 Opening Capital is not given in the question, it should be ascertained as follows:<\/p>\n<table class=\"mobile\" border=\"1\" width=\"833\" cellspacing=\"1\" cellpadding=\"3\">\n<tbody>\n<tr>\n<td style=\"text-align: center;\">Particulars<\/td>\n<td style=\"text-align: center;\">(Rs.)<\/td>\n<\/tr>\n<tr>\n<td rowspan=\"2\">Capital at the End<\/p>\n<p>Add: <strong>1.<\/strong> Drawingxxxxxx<\/p>\n<p><strong>2.<\/strong> Interest on Drawingsxxxxxx<\/p>\n<p><strong>3.<\/strong> Losses during the year xxxxxx<\/p>\n<p>Less: <strong>1.<\/strong> Additional Capital Introduced (xxxxxx)<\/p>\n<p><strong>2.<\/strong> Profits during the year (xxxxxx)<\/p>\n<p>3. Any salary\/commission received<\/p>\n<p>Opening Capital \u2026\u2026\u2026\u2026\u2026<\/td>\n<td>____________<\/td>\n<\/tr>\n<tr>\n<td>\u2026\u2026\u2026\u2026\u2026<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3><span class=\"ez-toc-section\" id=\"INTEREST_ON_DRAWINGS\"><\/span><strong>INTEREST ON DRAWINGS<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Interest on drawing is charged by the firm only when it is clearly mentioned in Partnership Deed. It is calculated with reference to the time period for which the money was withdrawn. There are two cases in which calulation of interest on drawings may arise:<\/p>\n<p><strong>Case 1: When Rate of Interest on Drawings is given in %<\/strong><\/p>\n<p>Interest on Drawings is calculated on flat rate irrespective of period.<\/p>\n<p><strong>Case 2: When Rate of Interest on Drawings is given in % p.a.<\/strong><\/p>\n<p><strong>1. When date of Drawing is not given<\/strong><\/p>\n<p>Interest on Drawing =\u00a0<span class=\"cke_widget_wrapper cke_widget_inline cke_widget_selected\"><span class=\"math-tex cke_widget_element\"><img decoding=\"async\" src=\"https:\/\/elpiscart.com\/cgi-bin\/mathtex.cgi?Total\\,Drawings \\times \\frac{{Rate}}{{100}} \\times \\frac{6}{{12}}\" \/><\/span><\/span><\/p>\n<p>Note: Interest is calculated for a period of 6 months, we assume drawings have been done evenly during the year, that is why we take average six months tenure.<\/p>\n<p><strong>2. When date of Drawings is given<\/strong><\/p>\n<p>Interest on Drawing =\u00a0<span class=\"cke_widget_wrapper cke_widget_inline cke_widget_selected\"><span class=\"math-tex cke_widget_element\"><img decoding=\"async\" src=\"https:\/\/elpiscart.com\/cgi-bin\/mathtex.cgi?Total\\,Drawings \\times \\frac{{Rate}}{{100}} \\times \\frac{{Time\\,left\\,after\\,drawings\\,(in\\,months)}}{{12}}\" \/><\/span><\/span><\/p>\n<p><strong>Case 3: When different amount are withdrawn on different dates:<\/strong><\/p>\n<p>We have the following two methods to calculate the amount of interest on Drawing:<\/p>\n<p><strong>1. Simple Interest Method<\/strong><\/p>\n<p>In this method, interest on drawing is calculated for each amount of drawing individually on the basis of periods for which it remained withdrawn till the close of accounting period.<\/p>\n<p><strong>2. Product Method<\/strong><\/p>\n<p>In this method, the amounts of drawings are multiplied by the period for which it remained withdrawn during the period;Thereafter the products are added and interest is calculated on the total of products so arrived at for one month. The advantage of this system is that separate calculations are not required each time.<\/p>\n<p>We can explain the above mentioned two methods with the help of an example.<\/p>\n<table class=\"mobile\" border=\"1\" width=\"830\" cellspacing=\"1\" cellpadding=\"3\">\n<thead>\n<tr>\n<th style=\"text-align: center;\" scope=\"col\">Month<\/th>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Drawings Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"text-align: center;\">\u00a0May<\/td>\n<td style=\"text-align: center;\">\u00a01<\/td>\n<td style=\"text-align: center;\">\u00a012000<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">July<\/td>\n<td style=\"text-align: center;\">31<\/td>\n<td style=\"text-align: center;\">6000<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">September<\/td>\n<td style=\"text-align: center;\">30<\/td>\n<td style=\"text-align: center;\">9000<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">November<\/td>\n<td style=\"text-align: center;\">30<\/td>\n<td style=\"text-align: center;\">12000<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">Janurary<\/td>\n<td style=\"text-align: center;\">1<\/td>\n<td style=\"text-align: center;\">8000<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">March<\/td>\n<td style=\"text-align: center;\">31<\/td>\n<td style=\"text-align: center;\">7000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Interest on drawings is to be charged @ 9% p.a<\/p>\n<h3><span class=\"ez-toc-section\" id=\"SIMPLE_METHOD\"><\/span><strong>SIMPLE METHOD<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table class=\"mobile\" border=\"1\" width=\"828\" cellspacing=\"1\" cellpadding=\"3\">\n<thead>\n<tr>\n<th scope=\"col\">DATE<\/th>\n<th scope=\"col\">AMOUNT<\/th>\n<th scope=\"col\">PERIOD<\/th>\n<th scope=\"col\">INTEREST @9%<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"text-align: center;\">1 MAY<\/td>\n<td style=\"text-align: center;\">12000<\/td>\n<td style=\"text-align: center;\">\u00a011<\/td>\n<td style=\"text-align: center;\">\u00a0 990<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\u00a031 JULY<\/td>\n<td style=\"text-align: center;\">\u00a06000<\/td>\n<td style=\"text-align: center;\">\u00a08<\/td>\n<td style=\"text-align: center;\">\u00a0 360<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\u00a0 30 SEP<\/td>\n<td style=\"text-align: center;\">\u00a0 9000<\/td>\n<td style=\"text-align: center;\">\u00a0 6<\/td>\n<td style=\"text-align: center;\">\u00a0 405<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\u00a030 NOV<\/td>\n<td style=\"text-align: center;\">\u00a012000<\/td>\n<td style=\"text-align: center;\">\u00a04<\/td>\n<td style=\"text-align: center;\">\u00a0 360<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\u00a01 JAN<\/td>\n<td style=\"text-align: center;\">\u00a08000<\/td>\n<td style=\"text-align: center;\">\u00a03<\/td>\n<td style=\"text-align: center;\">\u00a0 180<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\u00a031 MAR<\/td>\n<td style=\"text-align: center;\">\u00a07000<\/td>\n<td style=\"text-align: center;\">\u00a00<\/td>\n<td style=\"text-align: center;\">\u00a0 00<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\"><strong>TOTAL<\/strong><\/td>\n<td style=\"text-align: center;\">\u00a0 <strong>54000<\/strong><\/td>\n<td><\/td>\n<td style=\"text-align: center;\">\u00a0<strong>2295<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>PRODUCT METHOD<\/strong><\/p>\n<table class=\"mobile\" border=\"1\" width=\"829\" cellspacing=\"1\" cellpadding=\"3\">\n<thead>\n<tr>\n<th scope=\"col\">DATE<\/th>\n<th scope=\"col\">AMOUNT<\/th>\n<th scope=\"col\">PERIOD<\/th>\n<th scope=\"col\">\u00a0PRODUCTS<\/th>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">1 MAY<\/td>\n<td style=\"text-align: center;\">12000<\/td>\n<td style=\"text-align: center;\">\u00a011<\/td>\n<td style=\"text-align: center;\">\u00a0 132000<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\u00a031 JULY<\/td>\n<td style=\"text-align: center;\">\u00a06000<\/td>\n<td style=\"text-align: center;\">\u00a08<\/td>\n<td style=\"text-align: center;\">\u00a0 48000<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\u00a0 30 SEP<\/td>\n<td style=\"text-align: center;\">\u00a0 9000<\/td>\n<td style=\"text-align: center;\">\u00a0 6<\/td>\n<td style=\"text-align: center;\">\u00a0 54000<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\u00a030 NOV<\/td>\n<td style=\"text-align: center;\">\u00a012000<\/td>\n<td style=\"text-align: center;\">\u00a04<\/td>\n<td style=\"text-align: center;\">\u00a0 48000<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\u00a01 JAN<\/td>\n<td style=\"text-align: center;\">\u00a08000<\/td>\n<td style=\"text-align: center;\">\u00a03<\/td>\n<td style=\"text-align: center;\">\u00a0 24000<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\u00a031 MAR<\/td>\n<td style=\"text-align: center;\"><code>\u00a07000<\/code><\/td>\n<td style=\"text-align: center;\">\u00a00<\/td>\n<td style=\"text-align: center;\">\u00a0\u00a0\u00a0\u00a0 00<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\"><strong>TOTAL<\/strong><\/td>\n<td style=\"text-align: center;\">\u00a0 <strong>54000<\/strong><\/td>\n<td><\/td>\n<td style=\"text-align: center;\">\u00a0<strong>306000<\/strong><\/td>\n<\/tr>\n<\/thead>\n<\/table>\n<p>Interest = Total of products * 9\/100* 1\/12= 306000*9\/100*1\/12 = Rs 2295\/-.<\/p>\n<p><strong>Case 4: When an equal amount is withdrawn regularly<\/strong><\/p>\n<p>Interest on Drawing can be calculated using either Product Method or Direct Method (i.e. Short Cut Method)<\/p>\n<p>Direct Method will be used only if all the following three conditions are satisfied:<\/p>\n<p><strong>1.<\/strong> Amount should be same throughout the period<\/p>\n<p><strong>2.<\/strong> Date of Drawings should be same throughout the period<\/p>\n<p><strong>3.<\/strong> Drawings should be made regularly without any gap.<\/p>\n<p><strong>4.<\/strong> Interest on Drawing = <span class=\"cke_widget_wrapper cke_widget_inline cke_widget_selected\"><span class=\"math-tex cke_widget_element\"><img decoding=\"async\" src=\"https:\/\/elpiscart.com\/cgi-bin\/mathtex.cgi?Total\\,Drawings \\times \\frac{{Rate}}{{100}} \\times \\frac{T}{{12}}\" \/><\/span><\/span><\/p>\n<p>T = Time (in months) for which interest is to be charged\u00a0<span class=\"cke_widget_wrapper cke_widget_inline cke_widget_selected\"><span class=\"math-tex cke_widget_element\"><img decoding=\"async\" src=\"https:\/\/elpiscart.com\/cgi-bin\/mathtex.cgi?T = \\frac{{Time\\,left\\,after\\,first\\,drawing\\, + \\,Time\\,left\\,after\\,last\\,drawing}}{2}\" \/><\/span><\/span><\/p>\n<p>Value of T under Different circumstances will be as under:<\/p>\n<table class=\"mobile\" border=\"1\" cellspacing=\"1\" cellpadding=\"3\">\n<tbody>\n<tr>\n<td><\/td>\n<td>Monthly Drawings for 12 Months<\/td>\n<td>Quarterly Drawings for 12 Months<\/td>\n<td>Half yearly Drawings for 12 Months<\/td>\n<td>Monthly Drawings for 06 Months (last 6 months)<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><strong>6.<\/strong>5(beginning of the month)<\/td>\n<td><strong>7.<\/strong>5<\/p>\n<p>(beginning of every quater)<\/td>\n<td>9<\/p>\n<p>(beginning of every month for six month in the beginning of 6 months)<\/td>\n<td><strong>3.<\/strong>5(beginning of the month for last six month)<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td>6(middle of very month)<\/td>\n<td>6(middle of every quater)<\/td>\n<td>6<\/p>\n<p>middle of every month for six month in the beginning of 6 months)<\/td>\n<td>3(middle of the month for last six month)<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><strong>5.<\/strong>5( end of every month)<\/td>\n<td><strong>4.<\/strong>5(end of every quater)<\/td>\n<td>3\u00a0 (end of every month for six month in the beginning of 6 months)<\/td>\n<td><strong>2.<\/strong>5(end of the month for last six month)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3><span class=\"ez-toc-section\" id=\"INTEREST_ON_PARTNERS_LOAN\"><\/span><strong>INTEREST ON PARTNERS LOAN<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>If a partner has given loan to the firm, he is entittled to receive interest on such loan at an agreed rate.<\/p>\n<p><strong>It is a charge against profits. It is provided irrespective of profits or loss. It will also be provided in the absence of Partnership Deed @ 6% per annum.<\/strong><\/p>\n<p>The following entries are passed to record the interest on partner\u2019s loan<\/p>\n<p><strong>1.<\/strong> For allowing Interest on loan:<\/p>\n<p>Interest on Partner\u2019s Loan A\/cDr.<\/p>\n<p>To Partner\u2019s Loan A\/c<\/p>\n<p>(Being interest on loan allowed @ % p.a.)<\/p>\n<p><strong>2.<\/strong> For transferring Interest on Loan to Profit and Loss A\/c:<\/p>\n<p>Profit and Loss A\/cDr.<\/p>\n<p>To Interest on Loan A\/c<\/p>\n<p>(Being Interest on loan transferred to P &amp; L A\/c)<\/p>\n<p><strong>It is always DEBITED to Profit and Loss A\/c<\/strong><\/p>\n<p><strong>Rent Paid to Partner<\/strong>.<\/p>\n<p><strong>Rent paid to a partner is also a charge against profits and it will also be<\/strong><\/p>\n<p><strong>DEBITED to Profit and Loss A\/c<\/strong><\/p>\n<p><strong>Note:<\/strong><\/p>\n<p>Interest on A\u2019s Loan =<\/p>\n<p>=\u00a0<span class=\"cke_widget_wrapper cke_widget_inline cke_widget_selected\"><span class=\"math-tex cke_widget_element\"><img decoding=\"async\" src=\"https:\/\/elpiscart.com\/cgi-bin\/mathtex.cgi?2,00,000 \\times \\frac{6}{{100}} \\times \\frac{{05}}{{12}}\" \/><\/span><\/span>=Rs. 5,000<\/p>\n<p><strong>PAST ADJUSTMENTS<\/strong><\/p>\n<p>If, after preparation of Final Accounts of firm, it is found that some errors or commission in accounts has occurred than such errors or omissions are rectified in the next year by passing an adjustment entry.<\/p>\n<p>A statement is prepared to ascertain the net effect of such errors or omissions on partner\u2019s capital\/current accounts in the following manner.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Statement_showing_adjustment\"><\/span><strong>Statement showing adjustment<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table class=\"mobile\" border=\"1\" width=\"832\" cellspacing=\"1\" cellpadding=\"3\">\n<tbody>\n<tr>\n<td>Particulars<\/td>\n<td>A (Rs.)<\/td>\n<td>B (Rs.)<\/td>\n<td>C (Rs.)<\/td>\n<\/tr>\n<tr>\n<td>A Amount to be given credited<\/p>\n<p>Interest on Capital<\/p>\n<p>(Not allowed or provided at a lower rate)<\/p>\n<p>Partner\u2019s Salary or Commission etc.<\/p>\n<p>(Omitted to be recorded)<\/p>\n<p>Actual Profits<\/p>\n<p>(To be distributed in correct ratio)<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Total A<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>B. Amount already given to be taken back now debited<\/p>\n<p>* Interest on Capital<\/p>\n<p>(If given at a higher rate)<\/p>\n<p>* Interest on Drawings<\/p>\n<p>(If not charged)<\/p>\n<p>* Profits already distributed in wrong ratio<\/p>\n<p>(debited now)<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Total B<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Net Effect (A-B)<\/td>\n<td style=\"text-align: center;\">+\/-<\/td>\n<td style=\"text-align: center;\">+\/-<\/td>\n<td style=\"text-align: center;\">+\/-<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>+ Indicates Amount to be Credited to Partner\u2019s Capital Account \u2013 Indicates Amount to be Debited to Partners Capital Account<\/strong><\/p>\n<p><strong>Journal<\/strong><\/p>\n<table class=\"mobile\" border=\"1\" width=\"830\" cellspacing=\"1\" cellpadding=\"3\">\n<tbody>\n<tr>\n<td>Date<\/td>\n<td style=\"text-align: center;\">Particulars<\/td>\n<td>LF.<\/td>\n<td style=\"text-align: center;\">Debit(Rs.)<\/td>\n<td style=\"text-align: center;\">Debit(Rs.)<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td>Partners Capital A\/C Dr.<\/p>\n<p>(Amount to be Debited)<\/p>\n<p>To Partners\u2019 Capital A\/c<\/p>\n<p>(Amount to be Credited)<\/p>\n<p>(Being adjustment entry passed)<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>During Past Adjustment it is not compulsory that capital accounts of all partners are affected. More than one partners Capital Account may be debited or credited but amount of debit &amp; credit should be equal.<\/p>\n<p><strong>GUARANTEE OF PROFITS TO A PARTNER<\/strong><\/p>\n<p><strong>Guarantee is an assurance given to the partner of the firm that at least a fixed amount shall be given to him\/her irrespective of his\/her actual share in profits of the firm. If actual share in profits is less than the guaranteed amount in that case the deficit amount shall be borne either by the firm or by any partner as the case may be or as may have been decided bya na agreement.<\/strong><\/p>\n<p><strong>Note:<\/strong><\/p>\n<p>Guarantee to a partner is given for minimum share in profits. If the actual share in profits is more than the minimum share in profits, then the actual profits will be allowed to the partner.<\/p>\n<p>Case: <strong>1.<\/strong> When guarantee is given by FIRM (i.e. by all the Partners of the firm)<\/p>\n<p><strong>1.<\/strong> If share in actual profits is less than the guaranteed amount then. Guaranteed amount to a partner is first written off against the profits and then,<\/p>\n<p><strong>2.<\/strong> Remaining profits are distributed among the remaining partners in the remaining ratio.<\/p>\n<p>Case: <strong>2.<\/strong> When guarantee is given by a partner or partners to another partner.<\/p>\n<p><strong>1.<\/strong> Calculate the share in profits for the partner to whom guarantee is given.<\/p>\n<p><strong>2.<\/strong> If share in profits is more than the guaranteed amount, distribute the profit as per the profit and loss sharing ratio in usual manner.<\/p>\n<p><strong>3.<\/strong> If share in profits is less than the guaranteed amount, find the difference between the share in profits and the guaranteed amount and the difference known as deficiency.<\/p>\n<p>Deficiency is contributed by the partner or partners who guaranteed in certain ratio and subtracted from his or their respective shares.<strong>\u00a0 \u00a0 \u00a0<\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Accounting_for_partnership_firms_fundamentals_class_12_Notes_Accountancy\"><\/span>Accounting for partnership firms fundamentals class 12 Notes Accountancy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>CBSE Revision notes (PDF Download) Free<\/li>\n<li>CBSE Revision notes for Class 12 Accountancy PDF<\/li>\n<li>Revision notes Class 12 Accountancy \u2013 CBSE<\/li>\n<li>CBSE Revisions notes and Key Points Class 12 Accountancy<\/li>\n<li>Summary of the NCERT books all chapters in Accountancy class 12<\/li>\n<li>Short notes for CBSE class 12th Accountancy<\/li>\n<li>Key notes and chapter summary of Accountancy class 12<\/li>\n<li>Quick revision notes for CBSE board exams<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"CBSE_Class_12_Revision_Notes_and_Key_Points\"><\/span><strong>CBSE Class 12 Revision Notes and Key Points<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Accounting for partnership firms fundamentals class 12 Notes Accountancy. CBSE quick revision note for class-12 Chemistry Physics Math\u2019s, Accountancy and other subject are very helpful to revise the whole syllabus during exam days. The revision notes covers all important formulas and concepts given in the chapter. Even if you wish to have an overview of a chapter, quick revision notes are here to do if for you. These notes will certainly save your time during stressful exam days.<\/p>\n<ul>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-physics\/1251\/cbse-revision-notes\/7\/\">Physics<\/a><\/li>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-chemistry\/1267\/cbse-revision-notes\/7\/\">Chemistry<\/a><\/li>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-mathematics\/1284\/cbse-revision-notes\/7\/\">Mathematics<\/a><\/li>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-biology\/1298\/cbse-revision-notes\/7\/\">Biology<\/a><\/li>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-accountancy\/1315\/cbse-revision-notes\/7\/\">Accountancy<\/a><\/li>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-economics\/1327\/cbse-revision-notes\/7\/\">Economics<\/a><\/li>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-business-studies\/1727\/cbse-revision-notes\/7\/\">Business Studies<\/a><\/li>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-computer-science\/1851\/cbse-revision-notes\/7\/\">Computer Science<\/a><\/li>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-informatics-practices\/1873\/cbse-revision-notes\/7\/\">Informatics Practices<\/a><\/li>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-english-core\/1855\/cbse-revision-notes\/7\/\">English Core<\/a><\/li>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-history\/1869\/cbse-revision-notes\/7\/\">History<\/a><\/li>\n<li><a href=\"http:\/\/mycbseguide.com\/downloads\/cbse-class-12-physical-education\/1877\/cbse-revision-notes\/7\/\">Physical Education<\/a><\/li>\n<\/ul>\n<p>To download Accounting for partnership firms fundamentals class 12 Notes Accountancy, sample paper for class 12 Physics, Chemistry, Biology, History, Political Science, Economics, Geography, Computer Science, Home Science, Accountancy, Business Studies and Home Science; do check myCBSEguide app or website. myCBSEguide provides sample papers with solution, test papers for chapter-wise practice, NCERT Accounting for partnership firms fundamentals, NCERT Exemplar Accounting for partnership firms fundamentals, quick revision notes for ready reference, CBSE guess papers and CBSE important question papers. Sample Paper all are made available through\u00a0<a href=\"https:\/\/play.google.com\/store\/apps\/details?id=in.techchefs.MyCBSEGuide&amp;referrer=utm_source%3Dmycbse_bottom%26utm_medium%3Dtext%26utm_campaign%3Dmycbseads\"><strong>the best app for CBSE students<\/strong><\/a>\u00a0and myCBSEguide website.<\/p>\n<ul>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/goodwill-nature-valuation-class-12-notes-accountancy\/\">Goodwill Nature And Valuation class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/reconstitution-partnership-class-12-notes-accountancy\/\">Reconstitution of Partnership class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/admission-partner-class-12-notes-accountancy\/\">Admission of A Partner class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/retirement-death-partner-class-12-notes-accountancy\/\">Retirement or Death of a partner class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/dissolution-partnership-firm-class-12-notes-accountancy\/\">Dissolution Of a Partnership Firm class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/accounting-share-capital-class-12-notes-accountancy\/\">Accounting For Share Capital class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/accounting-debentures-class-12-notes-accountancy\/\">Accounting For Debentures class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/company-accounts-redemption-debentures-class-12-notes-accountancy\/\">Company Accounts \u2013 Redemption of Debentures class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/financial-statements-company-class-12-notes-accountancy\/\">Financial Statements Of A Company class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/financial-statement-analysis-class-12-notes-accountancy\/\">Financial statement analysis class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/tools-financial-statement-analysis-class-12-notes-accountancy\/\">Tools for financial statement analysis class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/accounting-ratios-class-12-notes-accountancy\/\">Accounting Ratios class 12 Notes Accountancy<\/a><\/li>\n<li class=\"entry-title\"><a href=\"https:\/\/mycbseguide.com\/blog\/cash-flow-statement-class-12-notes-accountancy\/\">Cash flow statement class 12 Notes Accountancy<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>CBSE Class 12 Accounting for partnership firms fundamentals\u00a0Accountancy in PDF are available for free download in myCBSEguide mobile app. The best app for CBSE students now provides accounting for partnership firm\u2019s fundamentals class 12 Notes latest chapter wise notes for quick preparation of CBSE board exams and school-based annual examinations. Class 12 Accountancy notes on &#8230; <a title=\"Accounting for partnership firms fundamentals class 12 Notes Accountancy\" class=\"read-more\" href=\"https:\/\/mycbseguide.com\/blog\/accounting-for-partnership-firms-fundamentals-class-12-notes-accountancy\/\" aria-label=\"More on Accounting for partnership firms fundamentals class 12 Notes Accountancy\">Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":9785,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48,456],"tags":[620,621,457,150,426,240],"class_list":["post-9471","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cbse-class-12","category-revision-notes","tag-accountancy-notes","tag-accounting-for-partnership-firms-fundamentals","tag-cbse-notes","tag-cbse-notes-and-key-points","tag-quick-revision","tag-quick-revision-notes"],"yoast_head":"<!-- This site is optimized with the Yoast 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