Case Study Accountancy Class 12- Partnership

Accountancy Case Study

Read the following hypothetical Case Study Accountancy text and answer the given questions:

Amit and Mahesh were partners in a fast-food corner sharing profits and losses in ratio 3:2. They sold fast food items across the counter and did home delivery too. Their initial fixed capital contribution was ₹ 1,20,000 and ₹ 80,000 respectively.

At the end of first year their profit was ₹ 1,20,000 before allowing the remuneration of ₹.3,000 per quarter to Amit and ₹  2,000 per half year to Mahesh. Such a promising performance for first year was encouraging, therefore, they decided to expand the area of operations.

For this purpose, they needed a delivery van, a few Scotties and an additional person to support. Six months into the accounting year they decided to admit Sundaram as a new partner and offered him 20% as a share of profits along with monthly remuneration of ₹ 2,500. Sundaram was asked to introduce ₹1,30,000 for capital and ₹ 70,000 for premium for goodwill. Besides this Sundaram was required to provide Rs.1,00,000 as loan for two years. Sundaram readily accepted the offer. The terms of the offer were duly executed and he was admitted as a partner.

Question 1:
Remuneration will be transferred to _______________ of Amit and Mahesh at the end of the accounting period.
a. Capital account.
b. Loan account.
c. Current account.
d. None of the above.
Answer and Explanation


Explanation: Given in the Case Study “Their initial fixed capital contribution was ₹1,20,000 and ₹80,000 respectively.”

When Fixed Capital is Given Remuneration will be transferred to Partners Current Account.

Question 2:

Upon the admission of Sundaram the sacrifice for providing his share of profits would be done:

(a) by Amit only.

(b) by Mahesh only.

(c) by Amit and Mahesh equally.

(d) by Amit and Mahesh in the ratio of 3:2.

Answer and Explanation

Answer: (D) by Amit and Mahesh in the ratio of 3:2.

Explanation: In the Case Study only new Partners Profit Share is given and Sacrifice made by the old partners is not given.

In this case, it is assumed that the new partner has acquired his share from old partners in their old profit sharing ratio.

Question 3:

Sundaram will be entitled to a remuneration of _____________at the end of the year.

Answer and Expalnation

Answer: ₹ 15000

Explanation: Given in the Case Study “………….Sundaram as a new partner and offered him 20% as a share of profits along with monthly remuneration of ₹ 2,500.”

2500 X 12 = ₹ 15,000

Question 4:

While taking up the accounting procedure for this reconstitution the accountant of the firm Mr. Suraj Marwaha faced a difficulty. Solve it be answering the following:

For the amount of loan that Sundaram has agreed to provide, he is entitled to interest thereon at the rate of ____________.

Answer and Explanation

Answer: 6% p.a.

Explanation: In the Case Study the Rate of Interest for Loan is not mentioned.

and According to the Indian Partnership Act 1932, in the absence of information about  Interest on Loan, it will be given @ 6% p.a.

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