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Target Exam

CUET

Subject

-- Accountancy Part A

Chapter

Accounting for Partnership

Question:

The Partnership agreement between Maneesh and Girish provides that:

(A) Profits will be shared equally
(B) Maneesh will be allowed a salary of Rs 400 pm
(C) Girish who manages the sales department will be allowed a commission of 10% of the net profits after deducting Maneesh's salary
(D) 7% p.a. interest will be allowed on Partner's fixed capital
(E) 5% p.a. interest will be charged on partner's annual drawings
(F) The fixed capitals of Maneesh and Girish are Rs 1,00,000 and Rs. 80,000 respectively. Their annual drawings were Rs. 16,000 and Rs 14,000 respectively. The net profit for the year ended March 31, 2019 amounted to Rs. 40,000

Calculate the profit allocated to each partner after all adjustments.

Options:

Rs 22,890 to each partner

Rs 8,790 to each partner

Rs 10,050 to each partner

Rs 10,290 to each partner

Correct Answer:

Rs 10,290 to each partner

Explanation:

The correct answer is Option (4) → Rs 10,290 to each partner

Particulars Amount (₹) Particulars Amount (₹)
To Partner's Current Accounts:   By Profit and Loss A/c (Net Profit) 40,000
Interest on Capital   By Partner's Current Accounts:  
Maneesh (1,00,000×7%) = 7000   Interest on Drawings  
Girish (80,000×7%) = 5600   Maneesh (16,000×5%) 800
Total Interest on Capital 12600 Girish (14,000×5%) 700
To Maneesh's Current A/c (Salary) 4800 Total Interest on Drawings 1,500
(400×12 months)      
To Girish's Current A/c (Commission) 3520    
Calculation: (40,000−4,800)×10%      
To Partner's Current Accounts (Share of Profit) 20580    
(Balancing Figure)      
Maneesh (1/2) 10290    
Girish (1/2) 10290    
Total 41500 Total 41,500

 Note: The given answer is as per NTA.

In standard accounting treatment, when the timing of drawings is not mentioned, interest is usually calculated for 6 months. However, in this particular MCQ, if we apply the 6-month rule, the final share comes to Rs 9,915, which is not among the given options. Hence, it appears that the paper-setter has considered interest on drawings for the full year so that the result matches the available choices.

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