punts (Fixed Capital Method) 19. On 1st January 2012, Manoj and Mukesh started a partnership business contributing * 25.000 and ? 15,000 respectively towards capital and agreeing to share profits and losses in the ratio of 3:2. As per the agreement, partners are entitled to interest on capital 10% per annum and Mukesh is entitled to a monthly salary of * 200. During the year 2012 Manoj and Mukesh withdrew 4,000 and 2,000 respectively. The interest on drawings worked out to be, Manoj * 150 and Mukesh 100. On 31st December 2012 their profit and loss account showed a credit balance of * 12,500 before making the above mentioned adjustments. Give necessary journal entries and prepare Profit and Loss Appropriation Account and the partner's capital accounts for the year 2012 when (a) capitals are fixed and to capitals are fluctuating Ans: (a) Current A/c - Manoj 2,160; Mukesh 4.340
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Answer:
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Explanation:
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