Palash and Pranjal are partners without any agreement on 1st January and they introduced capital 10,000/- and 5,000/- Rs. Respectively. On 31st August2020 Palash advances to the firm Rs. 4,000/- on loan. The profit and loss account for the year 2020 shows Profit of Rs. 4,000/- the partners are not agreed upon the question of interest and division of Profit. Prepare Profit and Loss account.
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Class 12
>>Accountancy
>>Accounting for Partnership: Basic Concepts
>>Profit and Loss Appropriation Account
>>A and B are partners from 1st April, 201
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A and B are partners from 1st April, 2017, without a Partnership Deed and they introduced capitals of Rs.35,000 and Rs.20,000 respectively. On 1st October, 2017, A advances a loan of Rs.8,000 to the firm without any agreement as to interest. The Profit and Loss Account for the year ended 31st March, 2018 shows a profit of Rs.15,000 but the partners cannot agree on payment of interest and on the basis of division of profits.
You are required to divide the profits between them giving reasons for your method.
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As there is no partnership deed,some provisions of the Indian Partnership Act,1932 shall apply. Partners are not entitled to any interest on the capital contributed by them and cannot withdraw any salary for the work done by them for the business. They are eligible for interest on any loan advanced by them to the firm @ 6%p.a.
Profits should be shared equally irrespective of the amount of capital contributed.
Hence,the distribution of profits should be carried out in the following ways:-
Net profit as per profit& loss Account = 15,000
Less: interest on A's loan = 8,000*6%*6/12 = 240
profits remaining = 14,760
Share of profits
A = 7,380
B= 7,380
Explanation:
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Search for questions & chapters
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Class 12
>>Accountancy
>>Accounting for Partnership: Basic Concepts
>>Profit and Loss Appropriation Account
>>A and B are partners from 1st April, 201
Question
Bookmark
A and B are partners from 1st April, 2017, without a Partnership Deed and they introduced capitals of Rs.35,000 and Rs.20,000 respectively. On 1st October, 2017, A advances a loan of Rs.8,000 to the firm without any agreement as to interest. The Profit and Loss Account for the year ended 31st March, 2018 shows a profit of Rs.15,000 but the partners cannot agree on payment of interest and on the basis of division of profits.
You are required to divide the profits between them giving reasons for your method.
Medium
Solution
verified
Verified by Toppr
As there is no partnership deed,some provisions of the Indian Partnership Act,1932 shall apply. Partners are not entitled to any interest on the capital contributed by them and cannot withdraw any salary for the work done by them for the business. They are eligible for interest on any loan advanced by them to the firm @ 6%p.a.
Profits should be shared equally irrespective of the amount of capital contributed.
Hence,the distribution of profits should be carried out in the following ways:-
Net profit as per profit& loss Account = 15,000
Less: interest on A's loan = 8,000*6%*6/12 = 240
profits remaining = 14,760
Share of profits
A = 7,380
B= 7,380
Explanation:
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