Showing your working clearly, pass a rectifying entry in the books of the firm.
55. A, B and C were partners. Their fixed capitals were 360,000, 7 40,000 and 20,000 respectively. Their profit-
sharing ratio was 2:2:1. According to the Partnership Deed, they were entitled to interest on capital @ 5% pa
In addition, B was also entitled to draw a salary of 1,500 per month.C was entitled to a commission of 5%
on the profits after charging the interest on capital, but before charging the salary payable to B.The net
profits for the year, * 80,000, were distributed in the ratio of their capitals without providing for any of the
above adjustments. Showing your workings clearly, pass the necessary adjustment entry.
(CBSE 2019)
Answers
Answer:
ANSWER:
(a) P is bound to pay Rs 20,000 together with profit of Rs 5,000 to the firm because this amount belongs to the firm.
Explanation: As per Principal and Agent relationship, P is principal as well as agent to the firm and to Q and R. As per this rule, any profit earned by an agent (P) by using the firm’s property is attributable to the firm.
(b) Q is liable to pay Rs 5,000 to the firm. As per the Partnership Act, 1932, every partner of a partnership firm is liable to the firm for any loss caused by his/her willful negligence.
Explanation: Here Q is solely responsible for the loss of Rs 1,000 because he used the property of the firm and also represented himself as a principal rather than an agent to the other partners and to the firm.
(c) P and Q may buy goods from A Ltd.
Explanation: As per Partnership Act, 1932, a partner has a right to buy and sell goods without consulting the other partners unless a Public Notice has been given by the partnership firm to restrict the partners to buy and sell.
(d) C will not be admitted because one of the partners P has not agreed to admit C.
Explanation: As per Partnership Act, a new partner cannot be admitted into a firm unless all the existing partners agree on the same decision. In other words, a new partner can be admitted in a partnership firm with the consent of all the existing partners
Explanation:
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