# Blog

## Adding Fractions

Adding Fractions (Addition of Fractions), deals with various concepts which are as under:-

- Adding Fractions with same Denominators ( Like Fractions )
- Adding Fractions with different Denominators ( Unlike Fractions )

To add Fractions with same denominators **( Like Fractions )**, we add the numerators and write the sum over the same denominator.

To add Fractions with different denominators **( Unlike Fractions )**, first we have to change the Unlike Fractions, into equivalent Like Fractions, and then add the two equivalent Like Fractions

### Adding Fractions with same Denominators ( Like Fractions )

**Example 1**

Find the sum of 5/12 and 1/12 and reduce to its lowest term.

**Solution**

Sum of Like Fraction = (5+1)/12

Sum of Like Fraction = 6/12

Hence, the sum of 5/12 and 1/12 is 6/12.

Simplifying further,

HCF of 6 and 12 is 6

Dividing both Numerator and Denominator by their HCF i.e,

Hence, the sum of 5/12 and 1/12 = 1/2

**Example 2**

Find the sum of 3/6 and 5/6 and reduce to its lowest term.

**Solution**

Sum of Like Fraction = (3+5)/6

Sum of Like Fraction = 8/6

Hence, the sum of 3/6 and 5/6 is 8/6

Simplifying further,

HCF of 8 and 6 is 2

Dividing both Numerator and Denominator by their HCF i.e,

Hence, the sum of 3/6 and 5/6 = 4/3

### Adding Fractions with different Denominators ( Unlike Fractions )

**Example 1**

Find the sum of 5/12 and 2/6 and reduce to its lowest term.

**Solution**

In order to add Unlike Fraction

Firstly, we have to change the Unlike Fraction, into equivalent Like Fractions, and then add the two equivalent Like Fractions

Take LCM of 12 and 6 is 12

Converting the Unlike Fraction into Equivalent Like Fraction

Simplifying further,

HCF of 9 and 12 is 3

Dividing both Numerator and Denominator by their HCF i.e,

**Example 2**

Find the sum of 1/3 and 2/4 and reduce to its lowest term.

**Solution**

In order to add Unlike Fraction

Firstly, we have to change the Unlike Fraction, into equivalent Like Fractions, and then add the two equivalent Like Fractions

Take LCM of 3 and 4 is 12

Converting the Unlike Fraction into Equivalent Like Fraction

Simplifying further,

HCF of 10 and 12 is 2

Dividing both Numerator and Denominator by their HCF i.e,

### Learn More..

## Subtracting Fractions

To subtract Fractions with same denominators **( Like Fractions )**, we subtract the numerators and write the difference over the same denominator.

To subtract Fractions with different denominators **(** **Unlike Fractions )**, first we have to change the Unlike Fractions, into equivalent Like Fractions, and then subtract the two equivalent Like Fractions

### Examples on Subtracting Fractions with like Denominators ( Like Fractions )

**Example 1**

Find the difference of 11/10 and 3/10 and reduce to its lowest term.

**Solution**

= (11-3)/10

= 8/10

Simplifying further,

HCF of 8 and 10 is 2

Dividing both Numerator and Denominator by their HCF i.e,

Hence, the difference of 11/10 and 3/10 = 4/5

**Example 2**

Find the difference of 11/8 and 5/8 and reduce to its lowest term.

**Solution**

= (11-5)/8

= 6/8

Simplifying further,

HCF of 6 and 8 is 2

Dividing both Numerator and Denominator by their HCF i.e,

Hence, the difference of 11/8 and 5/8 = 3/4

### Examples on Subtracting Fractions with Unlike Denominators ( Unlike Fractions )

**Example 1**

Find the difference of 13/6 and 4/3 and reduce to its lowest term.

**Solution**

To find the difference of Unlike Fraction

Firstly, we have to change the Unlike Fraction into equivalent Like Fraction, and then subtract the two equivalent Like Fraction

Take LCM of 6 and 3 is 6

Converting the Unlike Fraction into Equivalent Like Fraction

Hence, the difference of 13/6 and 4/3 = 5/6

**Example 2**

Find the difference of 5/2 and 5/3 and reduce to its lowest term.

**Solution**

To find the difference of Unlike Fraction

Firstly, we have to change the Unlike Fraction into equivalent Like Fraction, and then subtract the two equivalent Like Fraction

Take LCM of 2 and 3 is 6

Converting the Unlike Fraction into Equivalent Like Fraction

### Learn More..

## Like Fractions and Unlike Fractions

Like Fractions and Unlike Fractions, deals with various concepts which are as under:-

- Like Fractions
- Unlike Fractions
- Example of Like Fractions and Unlike Fractions
- Convert Unlike Fractions into Like Fractions

**Like Fractions**

Like Fractions are the Fractions having same denominators.

For example 1/2, 3/2 and 5/2 are Like Fractions.

**Unlike Fractions**

Unlike Fractions are the Fractions having different denominators.

For example 2/3, 3/5 and 4/7 are Unlike Fractions.

### Like Fractions and Unlike Fractions

### Example of Like Fractions and Unlike Fractions

**Example 1**

Are the following fractions are Like Fractions or Unlike Fractions?

2/3, 4/3 and 5/3

**Solution**

In case of Like Fraction, the denominator of the fractions are the same.

While, In case of Unlike Fraction denominator of the fractions are not same.

In the present case, the given fractions are

2/3, 4/3 and 5/3

Since, the Denominator in the present cases is 3 , which is the same for all fractions, the given fractions are Like Fractions

**Example 2**

Are the following fractions are Like Fractions or Unlike Fractions?

4/5, 5/6 and 6/7

**Solution**

In case of Like Fraction, the denominator of the fractions are the same.

While, In case of Unlike Fraction denominator of the fractions are not same.

In the present case, the given fractions are

4/5, 5/6 and 6/7

Since the Denominator in the present cases are 5 , 6 , 7 which are not same. So, the given fractions are Unlike Fractions

### Convert Unlike Fractions to Like Fractions

**Example 1**

Convert 2/5 and 1/6 into Like Fractions.

**Solution**

Step1: Find LCM of the denominators.

LCM of 5 and 6 is 30

Step 2: Divide the LCM by the denominators of the given Fractions

Step 3: Multiply the quotient by the numerator and keep denominator equal to the LCM. i.e.

**Example 2**

Convert 4/5 and 3/7 into Like Fractions.

**Solution**

Step1: Find LCM of the denominators.

LCM of 5 and 7 is 35

Step 2: Divide the LCM by the denominators of the given Fractions

Step 3: Multiply the quotient by the numerator and keep denominator equal to the LCM. i.e.

### Learn More..

## Goodwill | Class XII | Accounts

**Goodwill Meaning – **Goodwill Meaning, in general terms is the positive reputation of the firm, which enables it to achieve higher profitability, against its competitors, by helping it to attract a larger number of customers.

**The definition of Goodwill given by various authorities are as under:**

**Lord Lindley**

“The term goodwill is generally used to denote the benefit arising from connections and reputation.”

**Lord Eldon**

“Goodwill is nothing more than the probability that the old customers will resort to the old place”.

**Spicer and Pegler**

“Goodwill may be said to be that element arising from the reputation, connections or other advantages possessed by a business which enables it to earn greater profits than the return normally to be expected on the capital represented by the net tangible assets employed in the business.”

**Characteristics of Goodwill **

- Goodwill is an intangible asset. It cannot be seen our touched.
- Goodwill is not a fictitious asset as it has a value .
- Goodwill is an attractive force, which attracts more number of customers to old place of business.
- Goodwill increases profitability level of the firm;
- The value of goodwill constantly fluctuates.

**The need for Valuation of Goodwill may arise under the following cases : – **

**(i) **Change in profit sharing ratio amongst existing partners.

**(ii) ** Admission of a new partner in a partnership firm.

**(iii) **Death or retirement of an existing partner in a partnership firm.

**(iv) **When two firms are amalgamated.

**( v) ** When the business of a firm is sold to outsiders, valuation of goodwill of business.

**Factors affecting Goodwill **

**Factors affecting Goodwill can be internal factors, which are within the company, or external factors, which are a part of the economic environment in which the company operates. All these factors are discussed as under : – **

**Efficient Management:**Efficient management, manages the resources in the company in a manner which leads to higher profits in business . This is achieved by fulfilling the needs of customers, which increases the goodwill of the firm.**Location:**If the business is located at a favorable location, then it has a higher value of goodwill as compared to a business which is located at an unfavorable location.**Quality of goods and services:**If the firm provides best quality of goods and services to its customers then it has a higher goodwill than other firms.**Contracts:**If the firm has favourable contracts for the sale of its products and purchase of its raw material, then the firm enjoys a higher goodwill.**Access to supplies:**In case where the supplies of raw materials are difficult to secure, there will be a higher goodwill of the firm which has easy access to raw material.**After-sale services to the customers – customers tend to purchase from the company which provides better after Sales Service. The quality of service increasing the Goodwill of the company thereby increasing the number of customers who purchased from the company.****Patents owned by the firm –**If the company goes certain patents, it is able to exclude competition, and provide Certain exclusive products/services to the customers which increases the Goodwill of the company.**Effective advertisement –**It creates brand awareness, Increases the Goodwill of the company**Good Customer relation- A**company which has good relationships with its customers, tend to bring the customers back to them/ generates referrals, which increases the value of goodwill of the company

** TYPES OF GOODWILL**

**There are two types of goodwill, purchase goodwill and self generated goodwill. The definition of these two are discussed as under : – **

**(i) Purchased Goodwill:** Purchased goodwill arises, when one business is taken over by another business, and the price paid by acquirer i.e., purchase consideration, is more than the net assets (value) acquired in the business purchased. Such excess of purchase consideration over the net assets value is known as purchased goodwill.** **

** (ii) Self Generated Goodwill: **Self Generated Goodwill arises from business attributes like efficient management, favourable location, quality etc.

**of the company or firm. It is internally generated and no payment is made to any external party.**

**Methods of Valuation of Goodwill**

The following methods are most commonly used methods of Valuation of Goodwill:** **

**(i) **Average profit method of valuation of goodwill

**(ii) **Super profit method of valuation of goodwill

**(iii) **Capitalisation method of valuation of goodwill

** (a)** Capitalisation of Average Profit

** (b)** Capitalisation of Super Profit

**Number of Year’s Purchase_ Meaning**

Generally, the goodwill represents the ability of a company to earn certain excess profits over the normal profits earned by competitors for certain number of years. Number of Year’s Purchase, implies that the firm is expected to earn the same amount of profits , as they are earning, after the admission (or retirement/death) of a new partner for the given number of years .

### IMPORTANT FORMULAS:

** **** **

**Average Profit Method**

**Goodwill – Average Profit Method**

**Question : –**

Aaroh and Avroh were partners in a firm. They admit Anant for 3/4 the share in partnership, on 1st April 2016. Calculate the value of Goodwill on the basis of 4 year’s purchases of normal average profits of the last 5 years. The Profit and Loss Account showed the profit as follows: ”

2012-60,000 , 2013-75,000 , 2014-90,000 , 2015-75,000 , 2016-1,05,000

**Explanation : –**

Goodwill = Average profit X Numbers of year’s purchase

Total number of years = 5

Number of year purchase = 4

= 81,000

Goodwill = Average profit X Numbers of year’s purchase

= 81,000 X 4

= 3,24,000 Rs.

**Goodwill – Average Profit Method(Abnormal Gain & Abnormal Losses)**

**Question : –**

A and B were partners in a firm .They admit C for 1/3rd share in profit on 1st January 2015 .Value of the Goodwill is to be calculated based on the basis of 2 year’s purchases of normal average profits of last 5 years. The Profit and Loss Account showed the profit as follows:

2010-Rs.5,000 Including an abnormal gain of Rs 1,000

2011-Rs.10,000 Excluding Rs 4,000 as insurance premium

2012-Rs.4,000 After charging an abnormal loss of Rs 3,000

2013-Rs.8,000

2014-Rs.2,000 Loss

The value of goodwill will be:

**Explanation : –**

Goodwill = Average profit X Numbers of year’s purchase

Total number of years = 5

Number of year purchase = 2

Average Maintainable profits

Years

2010 = 5,000 – 1,000 = 4,000

2011 = 10,000 – 4,000 = 6,000

2012 = 4,000 + 3,000 = 7,000

2013 = 8,000

2014 = -2,000

Rs. 23,000

Average profit = 23000/5

= 4,600

Goodwill = Average profit X Numbers of year’s purchase

= 4,600 X 2

= 9,200 Rs.

**Valuation of Goodwill- Super Profit Method**

** **

**Goodwill – Super Profit Method**

**Question : –**

A and B who were partners in a firm admitted C for 1/4 share of profits on 1st April 2015. The capital investment of the firm was Rs. 1,00,000. A fair return on the capital, having regard to the risk involved is 10 %. If the profits for the last 2 years were 2013 = 40,000 Rs. , 2014 = 50,000 Rs. Find the value of goodwill on the basis of 2 year purchase of super profit?

**Explanation : –**

Goodwill = Super profit X Numbers of year’s purchase

Super Profit = Average Profit – Normal profit

Average profit =

Given numbers of years

Total number of years = 2

Number of year purchase = 2

Average profit = (40000+50000+0)/2

= 90000/2

= 45,000

Normal profit = Capital investment X Normal rate of return

= 1,00,000 X 10/100

= 10,000

Super Profit = 45,000 – 10,000

= 35,000

Goodwill = 35,000 x 2

= Rs. 70,000

**Valuation of Goodwill – Capitalisation Method :-**Under this method, valuation of goodwill can be calculated by capitalisation of average profit or capitalisation of super profit.

A. Capitalisation of Average Profit Method

Goodwill – Capitalisation of Average Profit

**Question : –**

A firm earns Rs. 1,00,000 as its annual profit, the normal rate of profit being 5 %.Assets of the firm are Rs. 15,00,000 excluding goodwill and liabilities are Rs. 5,00,000 .The value of goodwill by capitalisation method will be:

**Explanation : –**

= 100000/5 X 100

= 20,00,000

Net asset of the firm = Total Assets – Liabilities

= 15,00,000 – 5,00,000

= 10,00,000

Goodwill = Total capitalised value of business – Net assets

= 20,00,000 – 10,00,000

= Rs. 10,00,000

**B. Capitalisation of Super Profit**

** **

Goodwill – Capitalisation of Super Profit

**Question : –**

A firm having assets of Rs. 1,00,000 and liabilities of Rs. 1,50,000 earns the annual profits of Rs. 45,000 .The rate of normal profit being 10 %.The amount of goodwill by capitalisation of super profits will be:

**Explanation : –**

Average profits = 45,000

Capital employed (Net assets) = 1,00,000 – 1,50,000

= -50,000

= -50,000 X 10/100

= -5,000

**Super profits = Average profits – Normal profits**

= 45,000 – (-5,000)

= 50,000

= 50000/10 X 100

= Rs. 5,00,000

**Weighted Average Profit Method**

**Goodwill – Weighted Average Profit Method**

**Question : –**

The profits of a firm for the year ended 31st March for the last 1 year were as under :

The value of goodwill on the basis of 1 years purchase of the weighted average profit will be:

**Explanation : –**

Weighted Average profit = 50000/1

= 50,000

**Goodwill = Weighted Average Profit X Number of year’s purchase**

= 50,000 X 1

= Rs. 50,000

Some examples of methods of valuation of goodwill are as given below:

**Goodwill – Average profit method-Insurance Premium**

**Question : –**

A and B were partners in a firm .They admit C for 1/2 share in profit on 1st January 2016 Compute Average maintainable profit, for the Year 2017, if there was an insurance premium of Rs. 6000 excluded from profit of Rs. 17,000 . The value of goodwill will be:

**Explanation : –**

Average Maintainable profits = Profit for the Year – Insurance premium

= 17,000 – 6,000

= 11,000

**Goodwill – Average Profit Method(Type 4)**

**Question : –**

A and B were partners in a firm .They admit C for 2/3 share in profit on 1st January 2016 .Compute Average maintainable profit, for the Year 2017, if there was an abnormal loss of Rs. 3,000 included in the total profit of Rs. 10,000 . The value of goodwill will be:

**Explanation : –**

Average Maintainable profits = Profit for the Year + Abnormal Loss

= 10,000 + 3,000

= 13,000 Rs.

**Goodwill – Capitalisation of Super Profit(Type 2)**

**Question : –**

Average profit of the firm are Rs. 2,00,000 .Total tangible assets in the firm are Rs . 25,00,000 and Outside Liabilities are Rs. 10,00,000 .In the same type of business , the normal rate of return is 10 % of the capital employed.The value of goodwill by capitalisation of super profit method will be:

**Explanation : –**

Capital Employed = Total Tangible Assets – Outside Liabilities

= 25,00,000 – 10,00,000

= 15,00,000

= 15,00,000 X 10/100

= 1,50,000

**Super Profit = Average Profit – Normal Profit**

= 2,00,000 – 1,50,000

= 50,000

= 50000/10 X 100

= Rs. 5,00,000

**Goodwill – Normal Average Profit Method**

**Question : –**

B , C and D are partners sharing profits and losses in the ratio of 2 : 1 : 3 . They admit E for 1/3 share. For the purpose of admission of E ,the goodwill of the firm is to be valued on the basis of 1 years purchase of last 3 or 4 years profits,whichever is higher. The profits were:

The value of goodwill will be:

**Explanation : –**

Calculation of Average profits

=Rs. 90,000

Since the profit of Year 3 are higher, goodwill shall be calcualted based on the profit of 3 th Year

Goodwill = Average proft of 3 years X Number of year purchase

= 1,00,000 X 1

= Rs. 1,00,000

**Goodwill – Super profit Method(Type 3)**

**Question : –**

Average net profit of A Ltd expected in the future is Rs . 100000 per year.The average capital employed in the business is Rs 500000 .Normal profit expected from capital invested in this class of business is 10 %.The Remuneration of the partners is estimated to be Rs 20000 per annum.The value of goodwill on the basis of 3 year’s purchase of super profit will be :

**Explanation : –**

Average Annual Profit = 1,00,000 Rs.

Less : Remuneration = -20,000 Rs.

Actual Profit = 80,000 Rs.

Normal profit on capital employed = 5,00,000 X 10/100 = 50,000

Annual super profit = 80,000 – 50,000

= 30,000

Goodwill = 30,000 X 3

= Rs. 90,000

**Goodwill – Weighted Average Profit Method(Type 2)**

**Question : –**

The profits of a firm for the year ended 31st March for the last 2 years were as under :

The value of goodwill on the basis of 1 years purchase of the weighted average profit will be:

**Explanation : –**

Weighted Average profit = 40800/3

= 13,600

Goodwill = Weighted Average Profit X Number of year’s purchase

= 13,600 X 1

= Rs. 13,600

**Learn More..**

## Equivalent Fractions Examples

Equivalent Fractions Examples, deals with various concepts which are as under:-

- Find Equivalent Fraction With Given Numerator
- Find Equivalent Fraction With Given Denominator

Two or more Fractions are said to be Equivalent Fractions If they represent the same amount or same Fraction.

To get a fraction equivalent to a given fraction, we multiply or divide the numerator and the denominator of the given fraction by the same number (except 0 or 1)

## Equivalent Fractions Examples

**Equivalent Fractions Examples – Example 1**

Find the four fractions equivalent to 3/2 ?

**Solution**

To get a fraction equivalent to a given fraction, we multiply or divide the numerator and the denominator of the given fraction by the same number (except 0 or 1)

**Equivalent Fractions Examples – Example 2**

Find the four fractions equivalent to 4/3 ?

**Solution**

To get a fraction equivalent to a given fraction, we multiply or divide the numerator and the denominator of the given fraction by the same number (except 0 or 1)

### Equivalent Fraction With Given Numerator and Denominator

### Find Equivalent Fraction With Given Numerator

**Equivalent Fractions Examples – Example 3**

Write an Equivalent Fraction of 3/5 with Numerator 15 .

**Solution**

Let,

In order to obtain an equivalent fraction, we need to multiply the Numerator and Denominator of a given number , by same digit

To get 15 as Numerator, we have to multiply 3 by 5

In order to get an Equivalent Fraction, we have to multiply the Denominator by the same number, i.e, 5

i.e,

Hence, 15/25 is an Equivalent Fraction of 3/5 with Numerator 15 .

**Equivalent Fractions Examples – Example 4**

Write an Equivalent Fraction of 7/9 with Numerator 21 .

**Solution**

Let,

In order to obtain an Equivalent fraction, we need to multiply the Numerator and Denominator of a given number , by same digit

To get 21 as Numerator, we have to multiply 7 by 3

In order to get an Equivalent Fraction, we have to multiply the Denominator by the same number, i.e, 3

i.e,

Hence, 21/27 is an Equivalent Fraction of 7/9 with Numerator 21.

### Find Equivalent Fraction With Given Denominator

**Equivalent Fractions Examples – Example 5**

Write an Equivalent Fraction of 20/24 with Denominator 6.

**Solution**

Let,

In order to obtain an Equivalent fraction, we need to divide the Numerator and Denominator of a given number , by same digit

To get 6 in the Denominator, we need to divide 24 by 4

So, in order to get an Equivalent Fraction, we have to divide the Numerator also by 4

i.e,

Hence, 5/6 is an Equivalent Fraction of 20/24 with Denominator 6

**Equivalent Fractions Examples – Example 6**

Write an Equivalent Fraction of 15/12 with Denominator 4 .

**Solution**

Let,

In order to obtain an Equivalent fraction, we need to divide the Numerator and Denominator of a given number , by same digit

To get 4 in the Denominator, we need to divide 12 by 3

So, in order to get an Equivalent Fraction, we have to divide the Numerator also by 3

i.e,

Hence, 5/4 is an Equivalent Fraction of 15/12 with Denominator 4

### Learn More..

## Goodwill Meaning | Accounts Class 12

Goodwill is the positive reputation of the firm, which enables it to achieve higher profitability, against its competitors, by helping it to attract a larger number of customers.

The definition of Goodwill given by various authorities are as under:

**Goodwill Meaning as per Lord Lindley**

“The term goodwill is generally used to denote the benefit arising from connections and reputation.”

**Goodwill Meaning as per Lord Eldon**

“Goodwill is nothing more than the probability that the old customers will resort to the old place”.

**Goodwill Meaning as per Spicer and Pegler**

“Goodwill may be said to be that element arising from the reputation, connections or other advantages possessed by a business which enables it to earn greater profits than the return normally to be expected on the capital represented by the net tangible assets employed in the business.”

**Characteristics of Goodwill**

- Goodwill is an
**intangible asset**. It cannot be seen our touched. - Goodwill is
**not a fictitious asset**as it has a value . - Goodwill is an attractive force, which attracts more number of customers to old place of business.
- Goodwill increases profitability level of the firm;
- The value of goodwill constantly fluctuates.

## Nature of Partnership and Special Aspects of Partnership Accounts

Partnership firm involves two or more people, who join together to earn profits. Accounting for partnership firms involves preparing and maintaining the full set of accounts for the firm where all income, expenses, partners contribution, drawings etc are recorded.

As per the Section 4 of The Partnership Act, 1932, “**Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.**”

## Features of Partnership are as explained below:

**Sharing of Profits**: There must be an agreement between partners to share profits/losses of the business and the partners must be willing to share the profits/losses among themselves. These could be shared in the agreed ratio, or in the absence of any agreement, equally between the partners.**Two or more persons to form partnership****:**There must be at least two persons to form a partnership firm. The maximum number of partners cannot exceed the number of partners prescribed by the relevant Act, say Companies Act, 2013 which is 50.**Agreement**: Partnership must come into operation by an agreement between person, who are willing to share the profits and losses. It does not come into existence by an operation of law. Such an agreement can be either oral or written. The written agreement between partners is called “Partnership Deed”.**Existence of Business & Profit Motive**: A partnership can be formed to carry on a legal business . Such business should be formed with an intention of earning profit.**Business carried on by all or any of them acting for all**: It means that all partners can participate in the running of business individually. Further , each partner is bound by the act of other partners, whether individually or collectively by one or some of the partners.**Principal & Agent Relationship**: The relationship between the partners is that of an agent and principal. Each partner is an agent as well as a principal. He is called an agent because he can make others bound by his act and he is a principal because he will be bound by the act of others.

**Special Aspects of Partnership Accounts**

The treatment of accounting transactions in a partnership firm is more or less similar to that of a sole proprietorship business. However, there are a few exceptions which need to be followed while preparing the accounts of a partnership firm –

- Maintenance of Partners’ Capital Accounts (Fixed or Fluctuating);
- Distribution of Profit and Loss among the partners. A profit and loss appropriation account is prepared for this purpose;
- Adjustments for Wrong Appropriation of Profits in the Past;
- Reconstitution of the Partnership Firm (in case of any alteration in the structure); and
- Dissolution of Partnership Firm.

### Recording of Partnership Transactions

Transactions of the partnership firm are recorded according to the principles of the Double-entry system.

In partnership, the profits of the firm are divided among the partners.

Therefore, the profits as per Profit & Loss Account are transferred to a new account “**Profit and Loss Appropriation Account**“. The entries of interest on capital, interest on drawings, salary to partners etc. are shown in Profit & Loss Appropriation Account.

**The journal entries which are passed through Profit & Loss Appropriation Account are:**

**Partnership Accounting – Entry for Interest on Capital**

*Interest on Capital A/c Dr*

*To Partner’s Capital/Current A/c*

*(Being interest allowed on capital @ ____% p.a.)*

*Profit & Loss Appropriation A/c Dr*

*To Interest on Capital A/c*

*(Being interest on capital transferred to Profit & Loss*

* Appropriation A/c)*

#### Partnership Accounting – Entry for Interest on Drawings

*Partner’s Capital A/c Dr*

*To Interest on Drawings A/c*

*(Being interest on drawings charged)*

*Interest on Drawings A/c Dr*

*To Profit & Loss Appropriation A/c*

*(Being interest on drawings transferred)*

#### Partnership Accounting – Entry for Salary or Commission Payable to a partner:

*Partner’s Salary/Commission A/c Dr*

*To Partner’s Capital A/c*

*(Being salary/commission allowed to partners)*

*Profit & Loss Appropriation A/c Dr*

*To Partner’s Salary/Commission A/c*

*(Being salary/commission transferred)*

#### Partnership Accounting – Entry for transferring a part of profit to reserve:

*Profit & Loss Appropriation A/c Dr*

*To Reserve A/c*

*(Being reserve created)*

#### Partnership Accounting – Entry for transferring credit balance of Profit & Loss Appropriation A/c:

*Profit & Loss Appropriation A/c Dr*

*To Partner’s capital/Current A/c*

*(Being profits distributed among partners)*

**Learn More..**

## Partnership Deed | Accounts Class 12

Partnership Deed is the **written agreement between the partners, which is duly signed and registered under the Act and **contains all the terms and conditions which govern the operation of the activities of the partnership firm.

Since partnership results out of an agreement, it is essential that there must be some terms and conditions agreed upon by all the partners. Such terms and conditions may be either written or oral. Under the law, it is not mandatory to have a written agreement to form partnership. However, it is always better to have partnership through a written agreement duly signed and registered under the Act, as it helps avoid future disputes.

**The partnership deed, generally, contains the following : –**

- Name and address of the partnership firm
- Name and address of all the partners.
- Nature of business of the firm
- Capital contributed by each partner
- Interest on Capital
- Salary of Partners
- Profit Sharing Ratio among partners
- Drawings
- Interest on Drawings
- Method of valuation of Goodwill & its treatment
- Commencement Date of partnership
- Duration of Partnership
- Accounting period of the firm
- Method of recording of firm’s accounts
- Whether the firm’s books will be audited or not? If so, the mode of auditors appointment.
- Rule to be followed at the time of admission of partner
- Rule to be followed at the time of settlement of outgoing partners.
- Bank Account details
- Settlement of disputes

## Rules applicable in the absence of Partnership Deed:

**Sharing of Profits : –**In the absence of any partnership deed, the profits among the partners should be shared equally.**Salary/commission to the partners :-**The partners won’t get any portion of profit as salary/commission for their active participation in the business.**Interest on capital –**No interest on capital will be allowed to the partners.**Interest on drawings –**No interest on drawings is charged from the partners.**Interest on Loans –**Interest @ 6% p.a. is to be allowed on the loan given by the partners to the firm.**Right to participate in the conduct of the business**– Each partner has the right to participate in the conduct of the business.**Admission of A new partner**: -Admission of A new partner cannot be admitted into the firm without the consent of all partners.**Right to inspect the books of the firm –**Every partner has the right to inspect the books of the firm and also to take copies or extract of the same.

This Video discusses the key Rules which are applicable for various issues amongst the partners, in the absence of Partnership Deed.

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## Articleship assessment test ICAI – Level 1 | Direct Tax MCQ – Income from House Property

## Articleship assessment test ICAI – MCQ

Articleship assessment test ICAI has commenced from September 2018 and is applicable for Student who have completed first or second year of Articleship.

**Question 1:- **

**Ajay transfers his house property to his minor married daughter for inadequate consideration. After such transfer who will be considered as the owner of such house property for tax property?**

(a) Ajay

(b) Minor married daughter

(c) Both A & B equally

(d) None of the above

**Question 2:- **

**The rental income from a house property is considered under the Head ‘1 FHP’ when the building is used for:**

(a) Residential purpose

(b) Business purpose

(c) Either A and/or B

(d) None of the above

**Question 3:-**

**Aman, who is carrying on business has a property situated in Gurugram He lets out such property to Gurugram police department to locate their branch in order to run his business more efficiently. The rental income from such let out property would be taxed in the hands of Aman as ________________.**

(a) Income from House Property

(b) Income from Business or Profession

(c) Income from Capital Gain

(d) Income from Other Sources

**Question 4:-**

**When the income from letting of the property is inseparable from letting of assets, ________________.**

(a) Entire income will be taxable as income from house property

(b) Entire income will be taxable as income from business or profession

(c) Part of the income will be taxable as income from house property and part of the income will be taxable as income from business or profession

(d) Entire income will be taxable as income from other sources

**Question 5:-**

**If an owner charges both rent of the house property, as well as charges for other services provided along with the property, the entire rent is collectively known as _________________.**

(a) Combined Rent

(b) Collective Rent

(c) Total Rent

(d) Composite Rent

### Answers

- (b) Minor married daughter
- (c) Either A and/or B
- (b) Income from Business or Profession
- (b) Entire income will be taxable as income from business or profession
- (d) Composite Rent

## Coordinate Geometry | NCERT Solutions Practice Questions | Maths

### Coordinate Geometry

Coordinate geometry is one of the most important and exciting ideas of mathematics. In particular it is central to the mathematics students meet at school. It provides a connection between algebra and geometry through graphs of lines and curves.

### Cartesian System

A Cartesian coordinate system is a coordinate system that specifies each point uniquely in a plane by a pair of numerical coordinates, which are the signed distances from the point to two fixed perpendicular directed lines, measured in the same unit of length.

Here +x indicates about positive x-axis and –x indicates negative x-axis.

Similarly +y indicates positive y-axis and –y indicates negative y-axis.

### Quadrants

You have observed that the axes have divided the plane into four parts. These four parts are called as quadrants which are numbered as I, II, III and IV anticlockwise from +x. So the plane consists of the axes and quadrants. We call the plane, the Cartesian plane or the coordinate plane or xy plane and the axis are called as coordinate axis.

**Example 1**

In which quadrant does the point P(-2, 3) lie?

**Solution**

Coordinate axes divide the plane of the graph paper into four quadrants.

In Quadrant I, sign of coordinates are (+, +)

In Quadrant II, sign of coordinates are (-, +)

In Quadrant III, sign of coordinates are (-, -)

In Quadrant IV, sign of coordinates are (+, -)

Since, In Point P (-2, 3) x-coordinate is negative while y-coordinate is positive.

Hence, Point P (-2, 3) lie in Quadrant II.

**Example 2**

In which quadrant does the point Q (3, -4) lie?

**Solution**

Coordinate axes divide the plane of the graph paper into four quadrants.

In Quadrant I, sign of coordinates are (+, +)

In Quadrant II sign of coordinates are (-, +)

In Quadrant III sign of coordinates are (-, -)

In Quadrant IV sign of coordinates are (+, -)

Since, In Point Q (3, -4) x-coordinate is positive while y-coordinate is negative.

Hence, Point Q (3, -4) lie in Quadrant IV.

**Example 3**

In which quadrant does the point O (-3, -2) lie?

**Solution**

Coordinate axes divide the plane of the graph paper into four quadrants.

In Quadrant I, sign of coordinates are (+, +)

In Quadrant II sign of coordinates are (-, +)

In Quadrant III sign of coordinates are (-, -)

In Quadrant IV sign of coordinates are (+, -)

Since, In Point O (-3, -2) both x and y coordinate are negative.

Hence, Point O (-3, -2) lie in Quadrant III.

**Example 4**

In which quadrant does the point P(1, 4) lie?

**Solution**

Coordinate axes divide the plane of the graph paper into four quadrants.

In Quadrant I, sign of coordinates are (+, +)

In Quadrant II, sign of coordinates are (-, +)

In Quadrant III, sign of coordinates are (-, -)

In Quadrant IV, sign of coordinates are (+, -)

Since, In Point P (1, 4) both x and y coordinate are positive

Hence, Point P (1, 4) lie in Quadrant I.

#### How do we write the coordinates of a point?

We write the coordinates of a point using the following instruction.

1) The x-coordinates of a point is its perpendicular distance from y-axis measured along x-axis (Positive along the positive x-axis and Negative along the negative x-axis). For the point P it is 3. The **X-****coordinate is also called as the abscissa**.

2) The y coordinates of a point is its perpendicular distance from x-axis measured along the y axis (Positive along the positive y-axis and negative along the negative y-axis). For the point P that will be 4. **Y-coordinate is also known as the ordinate**.

3) In stating the coordinates of a point in the coordinate plane, the x-coordinate comes first and then the y-coordinate. We place the coordinates in the bracket i.e, **(3,4)**

**Example 1**

Write the coordinates of point P.

**Solution**

The point P is at 1 unit distance from y-axis and 3 units distance from x-axis. Therefore point P is (1,3)

**Example 2**

Write the coordinates of point B.

**Solution**

Point is at 2 unit distance from y-axis along positive x-axis so the x coordinate is 2 and from x-axis along negative y-axis the distance is 2 so the y-coordinate is -2. So the point B will be (2, -2).

**Example 3**

Write the coordinates of point Q.

**Solution**

The point is on y-axis so the distance from y-axis along the x-axis will be zero because it is on the y-axis. So the x coordinate will be zero. Similarly, the distance from x-axis along positive y-axis is 2 so the y-coordinate will be 2. So point Q is (0,2)

### How to Locate the points on the coordinate axis?

Let the coordinates of a point M be (-3, 2). We want to plot this point in the coordinate plane. We draw the coordinate axis and choose our units such that one centimeter represents one unit on both the axes. The coordinates of the point (-3, 2)tell us that the distance of this point from y axis along negative x-axis is 3 units and the distance of the point from the x-axis along the positive y-axis is 2 units. Starting from the origin we count 3 units on the negative x-axis and mark the corresponding point. Now starting from this point we move towards positive y axis and count 2 unit distance and mark the point. This point will be (-3, 2).

## Partnership Accounting – Interest on Drawings and Manager’s Commission Class 12

## Meaning of “Drawings” & “Interest on Drawings”

Partnership and partners are considered separate from each other. When partners withdraw money from business, for their personal use, then the term used for such withdrawal of money is known as **Drawings**. Since, drawings is a type of loan provided to the partner, the partner has to pay interest on the amount withdrawn from the firm , which is known as interest on drawings.

## Nature of the drawings

The nature of the drawings can be :

1. Drawings against salary or commission

2. Drawings against interest on capital

3. Drawing against share of profits etc.

### Calculation of Interest on drawings

Interest on drawings should be calculated from the date of the withdrawal of the amount.

In case the date of the withdrawal is not given, interest should be charged for six months on the total amount, because it is assumed that the drawings were made evenly throughout the year.

**Methods of Calculating Interest on drawings:**

There are two methods to calculate interest on drawings : –

**Simple Method:**Under this method, interest on drawings is calculated on each and every amount of drawing separately. It is calculated from the date of drawing till the close of accounting period. The formula to calculate interest is:

2.** Product Method:** In this method, the following steps are performed : –

- Calculate products of each drawing and its duration.
- Add different products
- Interest is calculated on the total of products so arrived at , for a period of one month. The formula to calculate interest under this method is:

### Interest on Monthly Drawings:

In certain cases, drawings could be made on a monthly basis, either at the **beginning of every month, or middle of every month or end of every month. The interest under each of these cases is calculated as under : –**

#### (II) Interest on Drawings -Drawings made at the end of every month:

#### (III) Interest on Drawings – Drawings made at the mid of every month:

### Interest on Quarter Drawings:

#### (IV) Interest on Drawings – Drawings made at the beginning of each quarter :

#### (V)Interest on Drawings – Drawings made at the end of each quarter:

#### (VI)Interest on Drawings – Drawings made at the mid of each quarter:

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