Question

$A$ and $B$ are partners sharing profits and losses in ratio of $2:3$ with capitals of $Rs.2,00,000$ and $Rs.1,00,000$ respectively. On 1st October, 2017, $A$ and $B$ granted loans of $Rs.4,00,000$ and $Rs.2,00,000$ respectively to the film. The Partnership Deed is silent as to the interest on
Partner's Loan. Determine the amount of profit/loss for the year ended 31st March, 2018 in each of the following cases to be distributed among partners:
Case 1: If the Profit before interest for the year amounted to $Rs.25,000$.
Case 2: If the Profit before interest for the year amounted to $Rs.15,000$.
Case 3: If the Loss before interest for the year amounted to $Rs.25,000$.

Answer 1

When the Partnership Deed is silent as to Interest on Partner's Loan, as per the Indian Partnership Act, 1932, interest @ 6% p.a. is allowed on loan by a partner.
Case 1: Distributable Profit/Loss $=$ Profit before Interest $-$ Interest on Partners' Loan
$=Rs.25,000-Rs.18,000=Rs.7,000$.
*Interest on A's Loan $(Rs.4,00,000\times \frac{6}{100}\times \frac{6}{12})$ $Rs.12,000$
Interest on B's Loan $(Rs.2,00,000\times \frac{6}{100}\times \frac{6}{12})$ $\underset{–}{Rs.6,000}$
Total $\underset{–}{Rs.18,000}$
Case 2: Distributable Profit/Loss $=$ Profit before Interest $-$ Interest on Partners' Loan
$=Rs.15,000-Rs.18,000=Rs.3,000$ (Loss).
Case 3: Distributable Profit/Loss $=$ Loss before Interest $+$ Interset on Paetner's Loan
$=Rs.25,000+Rs.18,000=Rs.43,000$ (Loss)