Ram & Sham are partners sharing profits &
losses in ratio of 3:2. Ram being non-working
partner contributes Rs. 20,00,000 as his capital
Shyam being a working parties, gets a salary of Rs.
8000 per month. As per partnership deed interest is
paid @ 8% p.a. & salary is allowed. Profits before
providing that for year ending 31st March 2015
were Rs. 80,000. Show the distribution of profits.
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Given data:
- Ram and Sham are partners sharing profits and losses in the ratio 3:2.
- Ram's capital is Rs 20,00,000.
- Sham gets a salary of Rs 8,000 per month.
- Interest on capital is charged at 8% p.a.
- The profit for the year was Rs 80,000.
Objective: To show the distribution of profits.
Answer:
Calculation of interest on capital:
Interest on capital = (Capital × Rate)/100
Interest on capital = (Rs 20,00,000 × 8)/100 = 1,60,000
Calculation of salary:
Since salary is allowed every month, multiply the amount by 12.
Salary = Rs 8,000 × 12 = Rs 96,000
Total of the appropriations = Rs 1,60,000 + Rs 96,000 = 2,56,000
Since the net profit is less than the appropriations, the profit will be distributed in the ratio of interest on capital to salary.
Ratio = Interest on capital:Salary
Ratio = 1,60,000:96,000
Ratio = 5:3
Therefore, the profit will be distributed in the ratio 5:3.
For Ram:
- Profit share = Rs 80,000 × 5/8 = Rs 50,000
For Sham:
- Profit share = Rs 80,000 × 3/8 = Rs 30,000
Therefore, the profit distribution of Ram and Sham are Rs 50,000 and Rs 30,000 respectively.
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