NCERT Solutions for Class 12 Accountancy Chapter 2 Accounting for Partnership : Basic Concepts

NCERT Solutions for Class 12 Accountancy Chapter 2 Accounting for Partnership : Basic Concepts

NCERT Solutions for Class 12 Accountancy Chapter 2 Accounting for Partnership : Basic Concepts is designed and prepared by the best teachers across India. All the important topics are covered in the exercises and each answer comes with a detailed explanation to help students understand concepts better. These NCERT solutions play a crucial role in your preparation for all exams conducted by the CBSE, including the JEE.

NCERT TEXTBOOK QUESTIONS SOLVED

1. Mohan and Shyam are partners in a firm. State whether the claim is valid if the
partnership agreement is silent in the following matters:
(i) Mohan is an active partner. He wants a salary of Rs. 10,000 per year

Ans. Invalid
I In the absence of partnership agreement, no interest on capital, interest on drawings, salary, commission is to be allowed to partners.

2. Shyam had advanced a loan to the firm. He claims interest @ 10% per annum

Ans. Invalid
Interest on partners loan to be allowed @ 6% pa,

3. Mohan has contributed Rs. 20,000 and Shyam Rs. 50,000 as capital. Mohan wants equal share in profits.

Ans. Valid
Profit and losses are to be shared equally.

4. Shyam wants interest on capital to be credited @ 6% per annum.

Ans. Invalid
No interest on capital is to be allowed to partners.

5. Why is Profit and Loss Adjustment Account prepared? Explain.

Ans. Profit and loss adjustment account is prepared to record those transaction or omissions and errors which were left while preparing the final accounts and they are found after the final accounts have been prepared and the profits distributed among the partners. The omission may be in respect of interest on capital, interest on drawings, interest on partners' loan, partner's salary, partner's commission or outstanding expenses. There may also be some changes in the provisions of partnership deed or system of accountings having impact with retrospective effect. All these acts of omission and commission need adjustments for correction of their impact. These omission errors and corrections can be recorded in partners' capital account directly but still it seems convenient to prepare the profit and loss adjustment account.

6. Give two circumstances under which the fixed capitals of partners may change.

Ans. Under the fixed capital method the capital of partners may change in the following two circumstances
(i) First, when fresh capital is introduced by the partner with the consent of other partners.
(ii) Second, when a part of capital is withdrawn by the partner with the consent of other partners.

7. If a fixed amount is withdrawn on the first day of every quarter, for what period the interest on total amount withdrawn will be calculated?

Ans. When fixed amount of money is withdrawn quarterly, it can be withdrawn either at the beginning or at the end of each quarter, if the amount is withdrawn at the end of each quarter, the interest is calculated on the total money withdrawn during the period of seven and half months .

8. In the absence of partnership deed, specify the rules relating to the following
(i) Sharing of profits and losses
(ii) Interest on partner's capital
(iii) Interest on partner's drawings
(iv) Interest on partner's loan
(v) Salary to a partner

Ans.(i)Sharing of Profit and Losses
In the absence of partnership deed profit sharing ratio among the pad maw will be equal.
(ii) Interest on Partner's Capital
In the absence of paonemnio oeeu interest on partners capital will not be given.
(iii) Interest on Partner's Drawings
In the absence of partnership deed no interest will be charged on partners drawings .
(iv) Interest on Partners Loan
In the absence of partnership deed if partner gives any loan to the firm he/she will be entitled to get fixed percentage of interest @6% of annum.
(v) Salary of Partner
In the absence of the patnership deed a partner will be entitled for getting any salary for his work even if the other are non working.

9. What is partnership? What are its chief characteristics? Explain.
According to the Section 4 of the Partnership Act, 1932
Partnership is an agreement between two or more persons who have agreed to share profits or losses of a business that will be carried by all or any one of them acting for all.
Person who joined their hands to set up the business are called 'partners individually and 'firm' collectively and the name under which they carry out their business is termed as 'firm name'.
The following are the important characteristics of partnership
(i) Two or More Persons
In order to form partnership, there should be at least two person coming together for a common goal In other words, the minimum number of partners in a firm can be two. There is however, a limit on their maximum number, if a firm is engaged in the banking business, it can have a maximum of ten partners while in case of any other business, the maximum number of partners can be twenty.
(ii) Partnership Deed
A partnership deed is an agreement among the partners which contains all the terms of the partnership. It generally contains the details about all the aspects affecting the relationship between the partners including the objective of business, contribution of capital by each partner, ratio in which the profits and the losses will be shared by the partners and entitlement of partners to interest on capital, interest on loan, etc.
(iii) Business
One of the important characteristics of a partnership is that it is formed to carry out a legal business. Partnership in case of illegal business is not valid.
(iv) Sharing of Profit
In case of a partnership the partners are suppose to share profit or loss on an agreed ratio or as per the provisions of the Partnership Act, 1932, as per which they will share profit equally.
(v) Liability
In the case of a partnership liability of partners are unlimited. If there is any obligation against the third party the partner will have to pay it out of his personal property.

10. Discuss the main provisions of the Indian Partnership Act, 1932 that are relevant to partnership accounts if there is no partnership deed.

Ans.It is always suggested that there must be a partnership deed among the partners before getting into any partnership venture. But sometimes a partnership is started without signing any such document. In this case the rules of partnership will be applicable as per the provisions of the Indian Partnership Act, 1932. The following are the provisions that are relevant to the partnership accounts in absence of partnership deed.
(i) Profit Sharing Ratio When a partnership deed is not made or even if it is made and silent on sharing of profit or losses among the partners of a firm, then according to the Partnership Act 1932, profits and losses are to be shared equally among all the partner of the firm.
(ii) Interest on Capital When there is absence of partnership deed or the partnership deed is silent on the issue related to interest on partner's capital, then according to the Partnership Act 1932, no interest on partners' capital will be provided. However, if they mutually agree on this issue than they are free to give interest on capital out of the profit of the firm.
(iii)Interest on Drawings there is no partnership Peed the issue 'elated h die interest on drawing will be handled according to the provisions Partnership Act. 1932 According sc which no Interest on drawing will be charge loan the orders on withdraw in the form of drawings.
(iv) Interest on Partner's Loan When there is no partnership deed among the partners or the partnership deed is silent on interest on partner's loan then according to the Partnership Act, 1932. the partners are entitled for 6% pa interest on the loan forwarded by them to the firm
(v) Salary to Partner When partnership deed is not there or it is silent on the issue related to salary to a partner, then as per the rules of the partnership Act. 1932. no partner will be entitled to any salary.

11. Explain why it is considered better to make a partnership agreement in writing.

Ans. As per Partnership Act. 1932, it is not necessary that a partnership agreement must be in writing but still it is always suggested that it should be in written form. Because today there are very good relationship among the partners but in future there may be any dispute regarding any Issue a written partnership agreement will help in avoiding dusputes and misunderstandings among the partners. In this way a written partnership deed is more desirable than the ora agreements. A written partnership agreement ensures the smooth functioning of the business of the partnership firm It aiso helps in settling the disputes among the partners. Moreover a duly signed and registered partnership deed can be used as evidence in the court of law. Therefore, it s desirable to form partnership deed in writing because of the moots associated with written documents over its oral counterparts.