Question

Aakriti and Bindu entered into partnership for making garment on April 01, 2004 without any partnership agreement. They introduced capitals of Rs 5,00,000 and Rs 3,00,000 respectively on October 01, 2006. Aakriti advanced Rs 20,000 by way of loan to the firm without any agreement as to interest. Profit and loss account for the year ended March 2007 showed profit of Rs 43,000. Partners could not agree upon the question of interest and the bases of division of profit. You are required to divide the profits between them giving reason for your solution.

Answer 1

In the absence of any agreement between partners

(i) Interest on partners loan is allowed 6% pa.

(ii) Interest on capital shall not be allowed.

(iii) Profits are to be distributed equally

$\begin{array}{cccccccc}\text{Dr}& & & & \text{Profit and Loss Appropriation Account}& & & \text{Cr}\end{array}$

$\begin{array}{ccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& \text{Amt. (Rs)}\\ \text{Interest on Partner's}& & & \text{Profit and Loss}& 43,000\\ \text{Loan}& & & & \\ \text{Aakriti}20,000\times \frac{6}{100}\times \frac{6}{12}& & 600& & \\ \text{Profit Transferred to}& & & & \\ \text{Aakriti's Capital A/c}& 21,200& & & \\ \text{Bindu's Capital A/c}& \underset{–}{21,200}& \underset{–}{42,400}& & \\ & & \underset{–}{\underset{–}{43,000}}& & \overline{\underset{–}{\underset{–}{43,000}}}\end{array}$