There are a large number of questions included in the learning activities given for each chapter here. But, for preparation of exam. paper pen practice is must. You have to maintain 'speed with accuracy' to score high.

Questions are from the single chapter but not according to the difficulty level or topic wise. These are jumbled to prepare you mentally for getting difficult questions at once.

Always note down your time taken before doing these questions. As these questions are based on actual examination questions, you should do these after thoroughly reading the notes and doing practice from your book.

Answers are given at the end.

Class 12 Accountancy MCQs Partnership Basic Concepts

1. Assertion: Ramesh, a partner in a firm with four partners has advanced a loan of ₹40,000 to the firm for last six months of the financial year without any agreement. He claims an interest on loan of ₹2,400 despite the firm being in loss for the year.

Reason: In the absence of any agreement / provision in the partnership deed, provisions of Indian Partnership Act, 1932 would apply.

a) Both Assertion and Reason are correct, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are correct, but Reason is not the correct explanation of Assertion.

c) Assertion is correct but Reason is incorrect.

d) Assertion is incorrect but Reason is correct.

2. Meena, Beena and Teena are partners, Teena has been given a guarantee of minimum profit of ₹8,000 by the firm. Firm suffered a loss of ₹5,000 during the year. Capital account of Beena will be ……… by ₹……….

a) Credited, ₹6,500.

b) Debited, ₹6,500.

c) Credited, ₹1,500.

d) Debited, ₹1,500.

3. Ankita and Babita are partners. Babita draws a fixed amount at the end of every quarter. Interest on drawings is charged @15% p.a. At the end of the year interest on Babita’s drawings amounted to ₹9,000. Drawings of Babita were:

a) ₹24,000 per quarter.

b) ₹40,000 per quarter

c) ₹30,000 per quarter

d) ₹80,000 per quarter

4. Anandi and Chandni are partners in a firm. On 1st July, 2023 Anandi advanced a loan of ₹6,00,000 to the firm. There is no partnership deed. On 31st March, 2024, Anandi was entitled to get the following amount as interest on loan:

a) ₹ 36,000

b) ₹18,000

c) ₹9,000

d) ₹27,000

5. Kawal and Preet were partners in a firm. Their partnership deed provided that interest on partners’ drawings will be calculated at 12% p.a. Interest on Preet’s drawings was calculated at ₹900. The necessary journal entry for charging interest on drawings will be:

a) Profit and Loss Appropriation A/c Dr. ₹ 900

To Interest on Drawings A/c ₹ 900

b) Interest on Drawings A/c Dr. ₹ 900

To Profit and Loss Appropriation A/c ₹ 900

c) Preet’s Capital/Current A/c Dr. ₹ 900

To Interest on Drawings A/c ₹ 900

d) Interest on Drawings A/c Dr. ₹ 900

To Partner’s Capital/Current A/c ₹ 900

6. Josh and Jeevan were partners in a firm. During the year ended 31.03.2023 Jeevan withdrew ₹ 5,000 per month starting from 30.06.2022. The partnership deed provided that interest on drawings will be charged @ 12% per annum. The average number of months for which are:

a) 6 months

b) 6.5 months

c) 4.5 months

d) 9.5 months

7. Assertion (A): - Commission provided to partner is shown in Profit and Loss A/c.

Reason (R): - Commission provided to partner is charge against profits and is to be provided at fixed rate.

a) (A) is correct but (R) is wrong

b) Both (A) and (R) are correct, but (R) is not the correct explanation of (A)

c) Both (A) and (R) are incorrect.

d) Both (A) and (R) are correct, and (R) is the correct explanation of (A)

8. A, B and C are in partnership business. A used ₹2,00,000 belonging to the firm without the information to other partners and made a profit of ₹35,000 by using this amount. Which decision should be taken by the firm to rectify this situation?

a) A need to return only ₹2,00,000 to the firm.

b)  A is required to return ₹35,000 to the firm.

c) A is required to pay back ₹35,000 only equally to B and C.

d) A need to return ₹2,35,000 to the firm.

9. Interest on Partner’s loan is credited to:

a) Partner’s Fixed capital account.

b) Partner’s Current account.

c) Partner’s Loan Account.

d) Partner’s Drawings Account.

10. Assertion - A firm should have a Partnership Deed.

Reason - In case, any dispute or any misunderstanding arises among partners, Partnership Deed acts as good evidence in the court. In the context of above two statements, which of the following is correct:

a) Assertion is correct but Reason is incorrect

b) Both Assertion and Reason are correct, but Reason is not the correct explanation of Assertion

c) Both Assertion and Reason are incorrect

d) Both Assertion and Reason are correct, and Reason is the correct explanation of Assertion

Class 12 Accountancy MCQs Partnership Basic Concepts

11. Ajay and Umar are partners in a hotel. Net Profit for the year ended 31st March, 2024 was ₹2,30,000. While preparing the Profit & Loss Account, following were not accounted - Hall charges for hall used by guests of partners free of charge@₹30,000 each partner, Repairs paid for Ajay's personal car ₹7,500 from the firm's bank account and accounted as an expense. Ajay and Umar are entitled to salaries as- Ajay ₹30,000 p.a., Umar ₹40,000 p.a. These salaries have not been paid. The correct net profit is:

a) ₹2,32,500

b) ₹2,27,500

c) ₹2,97,500

d) None of these

12. When a partner draws a fixed sum for 12 months at the beginning of each month, interest on drawings at an agreed rate will be equal to interest for:

a) 5.5 months

b) 6 months

c) 4.5 months

d) 6.5 months

13. Would interest on Partner's Loan to the firm be allowed in the absence of an agreement:

a) Interest is not allowed

b) Allowed only when agreed by all the partners

c) Will be paid only when adequate profit is earned

d) Allowed at 6% p.a.

14. Sangeeta and Mita were partners in a firm sharing profits and losses in the ratio of 7:1. Sangeeta withdrew a fixed amount of ₹12,000 at the beginning of each quarter. Interest on drawings is charged @ 6% p.a. The Journal entry for charging interest on drawings at the end of the year will be:

a) Interest on Drawings A/c Dr. To Sangeeta's Capital A/c ₹1,800

b) Interest on Drawings A/c Dr. To Sangeeta's Current A/c ₹1,800

c) Sangeeta's Capital A/c Dr. To Interest on Drawings A/c ₹1,800

d) Profit & Loss Appropriation A/c Dr. To Interest on Drawings A/c

15. Pinka, Tinku and Minka are partners in a firm dealing in steel utensils. Pinka withdrew ₹15,000 in the beginning of each quarter. Tinku withdrew steel utensils costing ₹22,500 for donation to an NGO. Minka withdrew ₹30,000 from his Capital Account. The Partnership Deed provides for interest on drawings @ 10% p.a. Interest on drawings charged from the partners will be:

a) Pinka - ₹7,200, Tinku - ₹1,250, Minka - ₹2,500

b) Pinka - ₹7,200, Tinku - ₹1,250, Minka - ₹2,000

c) Pinka - ₹3,750, Tinku - ₹1,125, Minka - Nil

d) Pinka - ₹7,200, Tinku - Nil, Minka - Nil

16. Simran and Baljit are partners in a firm. Simran draws a fixed amount at the end of each quarter. Interest on drawings is charged @ 10% p.a. At the end of the year, interest on Simran's drawings was ₹900. Drawings of Simran per quarter were:

a) ₹4,000

b) ₹6,000

c) ₹5,000

d) ₹8,000

17. Amrit, a partner in a firm is to receive interest of ₹5,000 on loan. The Journal entry would be:

a) Dr. Interest on Amrit's Loan Account and Cr. Amrit's Capital Account by ₹5,000

b) Dr. Bank Account and Cr. Amrit's Capital Account by ₹5,000.

c) Dr. Interest on Amrit's Loan Account and Cr. Amrit's Loan Account by ₹5000

d) Dr. Amrit's Loan Account and Cr. Interest on Amrit's Loan Account by ₹5,000

18. Assertion - Interest on Loan by Partner is credited to Partner's Loan Account.

Reason - Interest on Partner's Loan is a gain to a partner as a lender and not as a partner. In the context of above two statements, which of the following is correct:

a) Assertion is correct but Reason is incorrect

b) Both Assertion and Reason are correct, but Reason is not the correct explanation of Assertion

c) Both Assertion and Reason are incorrect

d) Both Assertion and Reason are correct, and Reason is the correct explanation of Assertion

19. ASSERTION - Om Prakash, a partner in a firm with four partners has advanced a loan of ₹80,000 to the firm for last six months of the financial year without any agreement. He claims an interest on loan of ₹4,800 despite the firm being in loss for the year.

REASONING - In the absence of any agreement / provision in the partnership deed, provisions of Indian Partnership Act, 1932 would apply:

a) A is correct but R is incorrect

b) A is incorrect but R is correct

c) Both A and R are correct, and R is the correct explanation of A

d) Both A and R are correct, but R is not the correct explanation of A

20. Neena, Jyoti and Poonam are in partnership business. Neena used ₹2,00,000 belonging to the firm without the information to other partners and made a profit of ₹35,000 by using this amount. Which decision should be taken by the firm to rectify this situation:

a) Neena needs to return only ₹2,00,000 to the firm

b) Neena is required to return ₹35,000 to the firm

c) Neena is required to pay back ₹35,000 only equally to Jyoti and Poonam

d) Neena needs to return ₹2,35,000 to the firm

More questions will be added ...

Class 12 Accountancy MCQs Partnership Basic Concepts - Answers

1. d) Assertion is incorrect but Reason is correct.
2. b) Debited, ₹6,500.
3. b) ₹40,000 per quarter
4. d) ₹27,000
5. c) Preet’s Capital/Current A/c Dr. ₹ 900To Interest on Drawings A/c ₹ 900
6. c) 4.5months
7. c) Both (A) and (R) are incorrect.
8. d) A need to return ₹2,35,000 to the firm.
9. c) Partner’s Loan Account.
10. d) Both Assertion and Reason are correct, and Reason is the correct explanation of Assertion
11. b) ₹2,27,500
12. d) 6.5 months
13. d) Allowed at 6% p.a.
14. c) Sangeeta's Capital A/c Dr. To Interest on Drawings A/c ₹1,800
15. c) Pinka - ₹3,750, Tinku - ₹1,125, Minka - Nil
16. b) ₹6,000
17. c) Dr. Interest on Amrit's Loan Account and Cr. Amrit's Loan Account by ₹5000
18. d) Both Assertion and Reason are correct, and Reason is the correct explanation of Assertion
19. b) A is incorrect but R is correct
20. d) Neena needs to return ₹2,35,000 to the firm

Class 12 Accountancy MCQs Valuation of Goodwill

Basics of Partnership Accounting

Learning Games and Activities in Accountancy – Class 12

The post Class 12 Accountancy MCQs Partnership Basic Concepts appeared first on Commerceatease - Website for 11th & 12th Commerce.

Accounting for Partnership Made Easy (Comic)

According to Friedrich Nietzsche, "Every real man has a child in him that wants to play".

Yes, I wanted to play. So, I created these little characters to teach the Basics of Accounting for Partnership. Students and teachers can create more innovative techniques after watching this.

Since, this is my original creation, I'll be too glad to see the modifications after quoting and linking this source. It would also motivate me to do something better.

Accounting for Partnership Made Easy (Comic)

Just Click on the Right-side Arrow of the slide to watch it.

Technical Tips for Teachers

The post Accounting for Partnership Made Easy (Comic) appeared first on Commerceatease - Website for 11th & 12th Commerce.

Mrs. A: What are you thinking about?

A: I am thinking about our shop.

Mrs. A: Is something wrong?

A: No, nothing wrong. But I am thinking about expanding it and we have full chances of its success even if we expand it.

Mrs. A: So, what is the problem then?

A: Problem is that I am not able to handle it all alone. If I appoint someone for a part of work, I will have to take care of him also. There will always be chances of misappropriation and poking in all the affairs of the business. He would tell all the secrets of our business to others.

Mrs. A: But try to understand, your work will also be shared. You can save that time and energy and concentrate on important work only; you give him routine work only.

A: But he will always be curious to know the amount of profit and would demand his share because of his efforts.

Mrs. A: Let me suggest something, my friend's brother has no stable job. If I talk to her about this and ask her brother to join you and bring money for our business, it can be fine for both of the families.

A: It can be fine, but there are chances of disputes, because of money.

Mrs. A: You get everything in writing. You may enter into written agreement with him, after fixing the terms and conditions.

A: Ok, you invite them to our place, we'll talk about this.

Both the families had a discussion and friend's brother B agreed to join A for business.

A clearly stated that profit earned will be given on the basis of his amount given for business, to which B agreed.

B: How much amount should I bring for joining you?

A: Whatever amount you want to invest plus ₹20,000.

B: Why this extra amount?

A: I have been in this business for three years and I have established a name and links with various parties. for that, this extra amount.

B: That is difficult. I don't have that much money.

A: We can adjust that from your main amount.

B: Ok.

They continued their business for a year. Then C expressed his willingness to join them.

C to A: I would like to join your business.

A: I'll ask B. If he agrees, It would be fine. By the way, how much amount will you bring for business?

C to A: I can spare ₹5,00,000.

A to B: C also wants to join us. He will bring ₹5,00,000

B to A: Ask him to give something more, this business has been there for so many years, and he will be taking the benefit of all this. Moreover, we have some profits appearing in our balance sheet also.

A to B: We'll share that before C joins. We'll also be getting all the assets and liabilities revalued before his joining the business.

A and B agreed on these points and inform C for the same. C agreed to pay ₹40,000 besides the main amount and expressed to get one third share of profits in future. A and B agreed to this and many more terms and conditions. They get it made in written form, in legal manner.

Now, A, B and C continued to run business.

One day, B expressed his willingness to leave this business to go abroad. A and C asked B to pay his dues in installments as paying the whole amount would lead to a financial setback along with already apparent managerial setback. B agreed.

How much B should get on his leaving the business?

The teacher can clear the following terms used in Partnership Accounting while discussing/dramatizing the above:

Partnership, Partnership Deed, Admission of a partner, Retirement of a partner, Goodwill, Goodwill paid in cash/kind(Premium for Goodwill), Revaluation of assets and liabilities etc.

It can be further extended to explain guarantee, death etc. also.

Basics of Partnership Accounting

Accounting for Partnership Made Easy (Comic)

Partnership Accounting

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Guarantee means the surety of a particular amount of profits to a partner by one or more partners, where the burden of guarantee is borne by the partners providing guarantee.

If however, the amount of profit as per profit sharing ratio comes out to be equal to or more than the amount of guarantee; actual profits are paid to that partner.

The burden of guarantee means the deficiency is borne by the partners giving the guarantee, in the same profit-sharing ratio or some specified ratio.

Different cases of Guarantee:

Following are different commonly found cases of guarantee:

(1) Guarantee to one partner by all other partners.

(2) Guarantee to one partner by only one other partner.

(3) Guarantee by other partners, deficiency borne in a particular ratio.

(4) When a partner provides a guarantee of a minimum income to the firm and the firm provides a guarantee to a partner for a specified amount of profits.

(1) Guarantee to one partner by all other partners.

A, B and C are partners sharing profits and losses in the ratio of 2: 2: 1. A and B have guaranteed that C’s share in any year shall not be less than ₹ 20,000. The net profit for the year ended March 31, 2024, amounted to ₹ 60,000. Prepare Profit and Loss Appropriation Account.

Dr.                                           Profit and Loss Appropriation Account.                                        Cr.

Working notes (hints):

C’s share is 1/5 of 60,000, which is less than ₹ 20,000, so he must be paid ₹20,000. The remaining profit ₹40,000 must be shared equally by the remaining partners in their profit-sharing ratio.

(2) Guarantee by one partner to only one other partner.

If however, in the first case only A provides guarantee to C, then this account would be as under, showing the amount of share of profits differently.

Dr.                                                        Profit and Loss Appropriation Account.                              Cr.

Working notes (hints):

C’s share is 1/5 of 60,000, which is less than ₹ 20,000, so he must be paid ₹20,000. B remains unaffected and receives his profit as 2/5 share i.e.₹24,000. Then a receives ₹16,000, bearing the burden of guarantee alone.

(3) Guarantee by other partners, deficiency borne in a particular ratio.

A, B and C are partners sharing profits in the ratio of 3:2:1. C is given a guarantee that his share of profit, in any year will not be less than ₹ 10,000. The profits for the year ending March 31, 2024, amounts to ₹ 54,000. Shortfall if any, in the profits guaranteed to C is to be borne by A and B in the ratio of 2:1. Prepare Profit and Loss Appropriation Account.

Dr.                                                            Profit and Loss Appropriation Account.                              Cr.

Working notes (hints):

C’s share in this case as per profit sharing ratio comes out to be ₹9,000 which is less than guarantee amount by ₹ 1,000, so he must be paid ₹10,000.The deficiency of ₹1,000 must be debited to A’s capital and B’s capital in the ratio 2:1.Then the account is to be balanced by transfer of profits to A’s capital and B’s Capital in their mutual profit sharing ratio i.e.3:2.

(4) When a partner provides a guarantee of a minimum income to the firm and the firm provides a guarantee to a partner for a specified amount of profits.

A, B and C are in partnership, sharing profits in the ratio of 3: 2: 1, provided that C’s share will not be less than ₹ 15,000 in any year. Further, B gives a guarantee that gross fee earned by him for the firm shall be equal to his average gross fee of the preceding five years, when he was carrying on his profession alone which is ₹25,000. The Net profit for the year ended March 31^st 2024 is ₹ 75,000. The gross fee earned by B for the firm was ₹ 16,000. You are required to show Profit and Loss Appropriation Account.

Dr.                                            Profit and Loss Appropriation Account.                                    Cr.

Working notes (hints):

Since B has provided the guarantee of a minimum fee, the deficiency in fees has been debited to B’s capital account, then the remaining profit distribution procedure has been followed as in previous cases mentioned above.

 Check Your Understanding

You can watch video here:

Guarantee of Profits

Learning Games and Activities in Accountancy – Class 12

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 (Pass adjustment entry).

1. Profit ₹30,000 distributed among A, B, C in the ratio 3:2:1 instead of 1:2:3. (Answer: A’s Capital a/c Dr. ₹10,000, B’s Capital a/c Cr. ₹10,000).
2. Profit ₹60,000 distributed among A, B, C equally instead of 1:2:3. (Answer: A’s Capital a/c Dr.10, 000, C’s Capital a/c Cr. ₹10,000).
3. A, B, C decided to change their Profit-sharing ratio from 2:1:2 to equal ratio with retrospective effect from the year 2009.Profits for the years 2009, 2010, 2011 earned by them amounted to ₹50,000, ₹70,000 and ₹90,000 respectively. (Answer: A’s Capital a/c Dr.14, 000, C’s Capital a/c Dr. ₹14,000 and B’s Capital a/c Cr.₹28,000).
4. P, Q and R have their capitals ₹3, 00,000, ₹2, 00,000 and ₹2, 00,000 respectively. After the distribution of year’s profit, the accountant discovered that Interest on Capital @6% was not allowed as provided in the partnership deed. (Answer: Q’s Capital a/c Dr.2, 000, R’s Capital a/c Dr. ₹2,000 and P’s Capital a/c Cr.₹4,000).
5. X, Y and Z have their capitals ₹2, 00,000, ₹3, 00,000 and ₹4, 00,000 respectively. After the distribution of year’s profit in the profit-sharing ratio 1:3:2 the accountant discovered that Interest on Capital @6% was not allowed as provided in the partnership deed. (Answer: Y’s Capital a/c Dr.9, 000, X’s Capital a/c Cr. ₹3,000 and P’s Capital a/c Cr. ₹6,000).
6. X, Y and Z having capitals of ₹ 80,000, ₹60,000 and ₹40,000 respectively shared profits after allowing Interest on capital @6% instead of @8%. (Answer: Z’s capital a/c Dr. ₹400 and X’s capital a/c Cr. ₹400).
7. M, N and O having capitals of ₹ 50,000, ₹40,000 and ₹30,000 respectively shared profits after allowing Interest on capital @10% instead of @8%. (Answer: M’s capital a/c Dr. ₹200 and O’s capital a/c Cr. ₹200).
8. P and Q have their capitals ₹80,000 and ₹60,000 respectively. After the distribution of year’s profit in the ratio of 2:3 the accountant discovered that Interest on Drawings @5% p.a. was not charged as provided in the partnership deed, their drawings amounted to ₹3,000 and ₹2,000. (Answer: P’s Capital a/c Dr.₹25, Q’s Capital a/c Cr. ₹25)

Past Adjustments Questions

Guarantee of Profits

Self-Learning Activities in Accountancy Class 12

Class 12 Accountancy MCQs Partnership Basic Concepts

The post Past Adjustments Questions appeared first on Commerceatease - Website for 11th & 12th Commerce.

(1) When there is single error.

Example:

A, B and C, are partners with capitals of ₹100,000, ₹200,000 and ₹300,000 respectively sharing profits and losses in the ratio of 3:2:1. The partnership deed provides for allowing interest on Capital @ 8 % p.a. After the final accounts have been prepared, it was discovered that interest on capital was allowed @ 6% p.a. Give necessary adjusting journal entry.

A’s Capital account         Dr. 4,000

To B’s Capital account   4,000

(Being the adjusting journal entry)

Past Adjustments - Illustrations

(2) When there are multiple errors.

Example:

The net profit of X, Y and Z for the year ended March 31, 2024 was ₹ 60,000 and the same was distributed among them in their agreed ratio of 3 : 1 : 1. It was subsequently discovered that the following points were not recorded in the books:

(i) Interest on Capital @ 5% p.a.

(ii) Interest on drawings amounting to X ₹ 700, Y ₹ 500 and Z ₹ 300.

(iii) Partner’s Salary: X ₹ 1000 p.a., Y ₹ 1500 p.a.

The capital accounts of partners were fixed as : X ₹ 50,000, Y ₹ 40,000 and Z ₹ 30,000. Record the adjustment entry.

Dr.                             Profit and loss Appropriation account                                                         Cr.

Now the comparative table is to be prepared:

X’s capital account   Dr. 1400

Z’s capital account   Dr.   200

To Y’s Capital account       1600

Test Your Understanding

Past Adjustments - Questions

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After preparing the Capital accounts of the partners it is sometimes discovered that there is some error in the calculation or omission of one or more items like: Interest on capital, Interest on Drawings, Salary or any other type of remuneration to one or more partners, profit sharing ratio etc.

In that case rather than cutting and preparing the capital accounts again for this correction, only adjusting entries are passed concerning the capital accounts of the partners thus affected. This has been covered under two heads here:

(1)  In case of single error:

The procedure to follow is ………Do what has not been done, cancel what has been done wrongly.

Then pass an adjusting entry by preparing a comparative table. preparing this comparative table Dr. /Cr. the partners as required by the provisions of the deed, then Cr. /Dr. to cancel as actually done.

Pass Journal entry with the excess amount in the net amount column.

Past Adjustments in Partnership Accounts

(2) In case of multiple errors:

When there are multiple errors to be set right, prepare Profit and Loss Appropriation account as per new correct provisions and calculate the claim of the partners separately.

Now prepare the comparative table as prepared above, Cr. the partner with the new claim and Dr. him for the amount already transferred to his capital account before such provisions were recorded correctly.

Now pass the adjusting entry with the net amount.

You can watch Video here:

Past Adjustments in Partnership Accounting

Past Adjustments  - Illustrations

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Sometimes the Profit-sharing ratio is based on partners’ capitals which keep on changing with every withdrawal or addition of capital. In this case the ratio of Effective Capitals is to be used as Profit sharing ratio.

The effective capitals are the capitals of the partners with respect to the number of months these have been used in the business during an accounting year, and can be calculated as under:

Capital Ratio = Ratio of effective capitals

Note: These tables must be prepared separately for each partner.

Calculation of New Profit Sharing Ratio on Admission

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There are three problems relating to the Interest on loan:

(a) Rule regarding……whether to allow or not (as already discussed).

(b) Calculation………The amount of Interest on Loan (now being discussed).

Calculation of Interest on Loan

Interest on Loan is always calculated with respect to the period it has been used in the business. Simple Interest formula is to be used:

Interest on Loan = (Amount*Rate*Months)/1200

Example:

Interest on Loan @ 6% p.a. on ₹30,000 for the whole year can be calculated as under:

Interest on Loan= (30,000*6*12)/100*12=₹ 1,800 or directly=6% of 30,000 (for full year).

Example:

Interest on Loan @ 6% p.a. on ₹30,000 advanced on 1st July, accounting year ending on March 31, can be calculated as under:

Interest on Loan= (30,000*6*9)/100*12= ₹1,350.

(c) Treatment…………Journal entries and Ledger accounts

Treatment:

(a) Interest on Loan A/c                             Dr.

To Partner’s Loan A/c

(b)Profit and Loss A/c                                Dr.

To Interest on Loan A/c

Note: In no case Interest on Loan should be recorded in Profit and loss Appropriation account or Capital account of the partners.

Past Adjustments

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(a) The journal entries have already been discussed with Profit and loss Appropriation Account.

(b) Partner’s commission can be calculated in two ways:

1. Partner’s commission on profits before charging such commission = (Rate*Profits)/100

2. Partner’s commission on profits after charging such commission = (Rate*Profits)/ (Rate +100)

Interest on Partner's Loan

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