Ritesh and Hitesh Are Childhood Friends. Ritesh is a Consultant Whereas Hitesh is an Architect. They Contributed Equal Amounts and Purchased a Building for Rs 2 Crores. After a Year, They Sold It for Rs 3 Crores and Shared the Profits Equally. Are They Doing the Business in Partnership? Give Reason in Support of Your Answer. - Accountancy

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Ritesh and Hitesh are childhood friends. Ritesh is a consultant whereas Hitesh is an architect. They contributed equal amounts and purchased a building for Rs 2 crores. After a year, they sold it for Rs 3 crores and shared the profits equally. Are they doing the business in partnership? Give reason in support of your answer.

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Solution

No, the relationship between Ritesh and Hitesh cannot be called as Partnership but would be they regarded as the co-owners. This is because Partnership requires the partners to conduct the business on a regular basis and share the profits from the same whereas in this case, this is a one-time activity.

Concept: Division of Profit Among Partners
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2017-2018 (March) Delhi Set 1

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Following is their Profit & Loss Appropriation Account

Particulars (₹) Particulars (₹)
To Interest on Capital   By Profit & loss account (After manager’s commission) __(2)__
Richa ______    
Anmol ______    
To Anmol’s Salary a/c 12,500    
To Profit transferred to: Richa’s Capital A/C (1) __(1)__    
Anmol’s Capital A/c ______    
  ______   ______

The amount to be reflected in blank (2) will be:


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Particulars (₹) Particulars (₹)
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To Profit transferred to: Richa’s Capital A/C (1) __(1)__    
Anmol’s Capital A/c ______    
  ______   ______

The amount to be reflected in blank (1) will be:


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