After doing their graduation Kamal suggested to his class mate Bimal to from a
partnership to sell low cost school uniforms to the students belonging to low income group
who have been admitted to the private schools of the city as per the provisions of Right to
Education Act, 2009. Bimal agreed to the proposal and proposed the name of his friend Vimal,
a specially abled unemployed person having good knowledge of cost reduction method.
However, it was agreed that Vimal will not contribute any capital. Kamal agreed to it. They
were in need of more capital. Kamal, therefore, persuaded a rich friend Deepak to be a partner.
All of them formed a partnership on the following terms:
1. Name of Firm : Apolo Kid Garments
2. Business : Manufacturing Business of Kid Garments
Kamal will contribute ` 2, 00,000; Bimal ` 80,000, Deepak ` 7, 00,000 and Vimal
will be partner with out Capital.
3. Profits will be shared amongst Kamal, Bimal, Vimal and Deepak 3: 2: 1: 4
respectively.
4. Interest on capital will be allowed @ 5% p.a.
5. Vimal gets commission ` 30,000
6. Bimal gets ` 40,000 as annual salary
7. Interest on drawings to be charged @ 10% p.a.
8. 10% of profits to be transferred to General Reserve.
9. All the transactions should be made through Bank.
They started business on 1st April, 2019 and deposited the whole amount of capital in ICICI
Bank. They purchased a running factory of Kid Garments consisting of Factory Land and
Building ` 4, 00,000, plant and Machinery `3, 50,000, Furniture ` 50,000, Stock ` 90,000, but
agreed to pay ` 9, 50,000, as purchase consideration. They later approached his banker for a
loan to meet the working capital requirement. Bank advanced loan amounting to ` 4,00,000 @
10% p.a . Deepak is entitled to a rent of ` 3,000 per month for the use of his building by the
firm. They purchased a computer for ` 30,000. Kamal advanced a ` 50,000 to the firm on 01-
01-2020 in the form of loan @ 9% per annum. The other transactions for the year ending 31st
,
March, 2020 were as follows
Total Purchases (`4, 10,000 in Cash) 12, 40,000
Total Sales (`5, 25,000 in Cash) 20, 87,125
Wages 2, 30,000
Carriage Inwards 20,500
Power and Lighting 15,500
Salary of Staff and Manager 1, 25,000
Postage and Call 4,200
Printing and Stationery 3,800
Advertising 16,700
Received from Debtors 12, 10,000
10% Fixed Deposit 5,00,000
Insurance Premium 12,100
Conveyance Charges 13,200
Paid to Creditors 7, 00,000
Bills Receivable received 1, 00,000
Bills accepted in favour of Creditors 80,000
Drawing during the year:
Kamal : ` 2,500 at the beginning of each month 30,000
Bimal : ` 1,500 at the last of each month 18,000
Vimal : `1,000 at the middle of the month 12,000
Adjustments:
1. Closing stock ` 1, 10,000.
2. Depreciate Land and Building by 5%, Plant and Machinery and Furniture by 10%
and Office Equipment by 25%.
3. Salary outstanding ` 8,000 and Wages Outstanding `15,000.
4. Insurance premium prepaid ` 1,200.
5. Accrued interest ` 25,000
6. Interest on bank loan due for a year.
You are required to:
1. Journalise these transactions and post them into ledger accounts and prepare Trial
Balance.
2. Prepare Trading and Profit and Loss Account, Profit and Loss Appropriation
Account and Balance Sheet.
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