Question

$A$ and $B$ are partners from 1st April, 2017, without a Partnership Deed and they introduced capitals of $Rs.35,000$ and $Rs.20,000$ respectively. On 1st October, 2017, $A$ advances a loan of $Rs.8,000$ to the firm without any agreement as to interest. The Profit and Loss Account for the year ended 31st March, 2018 shows a profit of $Rs.15,000$ but the partners cannot agree on payment of interest and on the basis of division of profits.
You are required to divide the profits between them giving reasons for your method.

Answer 1

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