Question

Q.No. 11. (Partner's Loan) P and Q are partners in a firm sharing profits and losses in the ratio of 4:1. On 1st April 2014, the capitals of the partners were: P 1,00,000 and Q80,000. You are required to prepare necessary ledger accounts to show the distribution of profit after taking into account the following information: (1) Net profit of the firm on 31st March 2015 was 2,50.000 () Interest on capital was allowed @5% per annum. (ii) Q advanced * 80,000 to the firm as loan. Allow interest on loan for the whole year. (iv) Drawings of the partners were P20,000 and Q15,000. (v) Firm charged interest on drawings as: P 600 and Q3450. (vi) Transfer 10% of the distributable profit to Reserve Fund. (Ans. Interest on Q's Loan 4.800; Transfer to Reserve Fund 23,725; Share in Profit P 1.70,820 and Q 42,705.)​

Answer 1

Explanation:

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Answer 2

Answer

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