Adjustments

Interest on capital is an appropriation of profit so it is allowed only up to available profit. Do not treat it as an expense in exams.

Total interest is (₹20000) but profit is only (₹15000) so interest is reduced in (2:3). A gets (15000 \times \frac{2}{5}=₹6000).

Interest on drawings is charged only when the rate is clearly given. Do not assume a rate in the exam.

For monthly drawings at the beginning the average period is (6.5) months. Interest is (36000 \times 12% \times \frac{6.5}{12}=₹2340).

For withdrawals at month end the first amount remains for (11) months and the last for (0) months. The average period is (5.5) months.

When the deed is silent profits and losses are shared equally. Capital ratio applies only when the deed says so.

Since the commission is calculated on the total profit before profit distribution, commission = 10% × ₹88,000 = ₹8,800. Option A, ₹8,000, would apply if the commission were 10% of profit after charging the commission, which is not the case here. Exam tip: When the wording says ‘of total profit’, apply the stated percentage directly to the given total profit.

The profit after charging commission is ₹1,10,000 − commission. If the commission is C, then \(C=10\%\times(1,10,000-C)\). Therefore, \(C=\frac{10}{110}\times1,10,000=₹10,000\). Option A incorrectly applies 10% to the profit before commission. Exam tip: when commission is calculated on profit after charging commission, use \(\frac{rate}{100+rate}\times\) profit before commission.

The deficiency is (40000-33000=₹7000). The partner bearing it is debited and the guaranteed partner is credited.

A's normal share is (72000 \times \frac{5}{8}=₹45000) so deficiency is (₹5000). Because of the guarantee A gets (₹50000).

The direct answer is B: interest on capital will not be allowed when the firm has suffered a loss. Interest on capital under a partnership deed is normally an appropriation of profit, meaning it is distributed from available profit after determining profit. It is not an ordinary business expense that must be charged even when there is no profit. Therefore, if the firm has a loss, no interest on capital is credited unless the deed or a special agreement clearly provides otherwise. Option A is wrong because the loss is not increased by allowing this appropriation; the amount is simply not allowed. Option B is correct. Option C is wrong because the amount is not automatically transferred to a loan account. Option D is wrong because the rule does not depend on whether a partner is active; it depends on the deed and availability of profit. A common mistake is treating interest on capital like interest on a business loan. A partner's capital is part of the partnership arrangement, so this interest is generally an appropriation, not an expense.

The additional capital remained in the business for 9 months, from 1 July to 31 March. Therefore, interest = \(₹60,000 \times 8\% \times \frac{9}{12} = ₹3,600\). Option B incorrectly applies the rate for the full 12 months. In the examination, count the period from July to March as 9 months.

The capital reduction period is (3) months. Interest decreases by (40000 \times 9% \times \frac{3}{12}=₹900).

Under fixed capital method regular adjustments go to current accounts. Capital accounts normally remain fixed.

Under fluctuating capital method adjustments like salary and interest are posted directly to capital account. No separate current account is maintained.

After salary the remaining (₹70000) is shared equally. A's correct share is (30000+35000=₹65000) so (₹15000) is transferred from B.

The omitted interest would have reduced shares by (₹18000) and (₹6000) in profit ratio. B should receive (₹9000) so B gains (₹3000).

When the deed is silent partner's loan carries interest at (6%) per annum. It is a charge against profit not an appropriation.

Interest on drawings is a recovery from partners so divisible profit increases. It is credited to profit and loss appropriation account.

The first amount is for (12) months and the second for (6) months. Interest is (20000 \times 10%+30000 \times 10% \times \frac{6}{12}=₹3500).

The direct answer is B, ₹13500. The deed says that the salary is time based, so A receives only the proportion of the annual salary corresponding to the nine months of partnership. One year has 12 months. The monthly equivalent is
₹18000/12=₹1500
. For 9 months, salary is
₹1500\times9=₹13500
, or directly
₹18000\times\frac{9}{12}=₹13500
. Therefore option B is correct. Option A, ₹18000, would give the full annual salary even though A was a partner for only nine months, ignoring the time condition. Option C, ₹9000, corresponds to only six months and is too low. Option D, nil, is wrong because the deed clearly grants salary and A served for nine months. The calculation assumes the stated annual salary is spread evenly through the year and that no other adjustment is mentioned. Exam cue: when a salary is explicitly time based, multiply annual salary by months served divided by 12.

Direct answer: Option B, ₹132,000. Profit shown by the Profit and Loss Account is ₹140,000. Interest on a partner’s loan is a business charge, not an appropriation of profit. Therefore it must be deducted before the remaining profit is distributed among partners. Step 1: start with ₹140,000. Step 2: deduct loan interest of ₹8,000. Step 3: ₹140,000 − ₹8,000 = ₹132,000. Option A, ₹148,000, is wrong because it adds the interest instead of deducting it. Option B, ₹132,000, is correct because loan interest reduces profit before appropriation. Option C, ₹140,000, is wrong because it ignores the unpaid interest expense. Option D, ₹8,000, is only the amount of interest, not the profit left for appropriation. Remember: interest on a partner’s loan is a charge against profit; first calculate profit after this charge, and only then make appropriations such as partner salary, commission or interest on capital.

Interest on capital is based on capital amount not profit ratio. So the ratio is (100000:50000=2:1).

Both are appropriations of profit and if the deed gives no priority the available profit is divided proportionately. In exams first check priority in the deed.

Direct answer: Option A, ₹15,000, under the stated no-priority assumption. A's stated claims are salary ₹20,000 plus capital interest ₹10,000, total ₹30,000. B's capital interest is ₹20,000, so total claims are ₹30,000+₹20,000=₹50,000. Available profit is only ₹25,000, exactly half of the claims. With no priority, distribute the available amount in the claim ratio 30,000:20,000=3:2. A receives 3/5 of ₹25,000 = ₹15,000. Option A is correct. Option B, ₹12,500, would be half of the profit but ignores A's larger claim. Option C, ₹10,000, ignores the salary and interest structure. Option D, ₹20,000, is not A's proportional share. The important accounting idea is that when appropriations cannot be paid fully and no priority is specified, claims are scaled proportionately. Memory cue: total claim, available fraction, then each partner's claim × that fraction.