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Question
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A and B are partners sharing profits and losses in the ratio of their capitals which were ₹ 6,00,000 and ₹ 4,00,000 respectively on 1st April, 2023. The partnership deed provides that:
On 1st July, 2023 A and B granted loans of ₹ 1,00,000 and 50,000 respectively to the firm. During the year ended 31st March 2024, the firm incurred a loss of ₹ 17,250 before any adjustment is made as per partnership deed. |
Prepare an account showing the distribution of profit/loss.
Hint: Salary to Partners and interest on capitals will not be provided and P & L App. A/c will not be prepared since the firm has suffered loss.
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Solution
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Profit & Loss Account
For the year ended 31st March, 2024 |
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| Particulars | Amount (₹) | Amount (₹) | Particulars | Amount (₹) | Amount (₹) |
| To Net Loss b/d | 17,250 | By Net Loss transferred to: | |||
| To Rent to A | 96,000 | A's Capital A/c | 72,000 | ||
| To Interest on Partners' Loans | B's Capital A/c: | 48,000 | 1,20,000 | ||
| A's Loan: | 4,500 | ||||
| B's Loan: | 2,250 | 6,750 | |||
| Total | 1,20,000 | Total | 1,20,000 | ||
Working note:
Capital Ratio (A : B): 6,00,000 : 4,00,000 = 3 : 2
A's Rent: 24,000 × 4 quarters = 96,000
Interest on Loans (from 1st July 2023 to 31st March 2024 = 9 months):
Since no interest rate is specified in the deed, the statutory rate of 6% p.a. is applicable as per the Indian Partnership Act, 1932.
Interest on A's Loan: `1,00,000 xx 6% xx 9/12 = 4,500`
Interest on B's Loan: `50,000 xx 6% xx 9/12 = 2,250`
Total Interest on Loan = ₹ 6,750
- Initial Loss Given: ₹ 17,250
- Total Loss after Charges:
17,250 (Initial loss) + 96,000 (Rent) + 6,750 (Interest on Loan) = 1,20,000
Distribution of Loss (3 : 2)
A's Share: `1,20,000 xx 3/5 = 72,000`
B's Share: `1,20,000 xx 2/5 = 48,000`
