Aakriti and Bindu entered into partnership for making garment on April 01, 2016 without any Partnership agreement. They introduced Capitals of Rs 5,00,000 and Rs 3,00,000 respectively on October 01, 2016. 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 2017 showed profit of Rs 43,000. Partners could not agree upon the question of interest and the basis of division of profit. You are required to divide the profits between them giving reason for your solution.

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Solution

Profit and Loss Adjustment Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Partner’s Loan

Profit and Loss

43,000

Aakriti 20,000 × (6/100) × (6/12)

600

Profit transferred to

Aakriti’s Capital

21,200

Bindu’s Capital

21,200

42,400

43,000

43,000

Reason

a) Interest on partners loan shall be allowed at 6% p.a. because there is no partnership agreement.

b) Interest on capital shall not be allowed because there is no agreement on interest on capital.

c) Profit shall be distributed equally because profit sharing ratio has not been given.

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Similar questions

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.

A

and

B

entered into partnership on 1st April, 2017 without any Partnership Deed. They introduced capitals of

R s . 5, 00, 000

and

R s .3, 00, 000

respectively. On 31st October, 2017,

A

advanced

R s . 2, 00, 000

by way of loan to the firm without any agreement as to interest. The Profit and Loss Account for the year ended 31st March, 2018 showed a profit of

R s . 4, 30, 000

, but the partners could not agree upon the amount of interest on loan to be charged and the basis of division of profits.
Pass a Journal entry for distribution of the profit between the partners and prepare Capital Accounts of both the partners and Loan Account of

A

A

and

B

are partners from 1st April, 2017, without a Partnership Deed and they introduced capitals of

R s . 35, 000

and

R s . 20, 000

respectively. On 1st October, 2017,

A

advances a loan of

R s . 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

R s .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.

Q. A and B are partners from 1st April, 2017, without a Partnership Deed and they introduced capitals of ₹ 35,000 and ₹ 20,000 respectively. On 1st October, 2017, A advances a loan of ₹ 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 ₹ 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.

Q. A and B are partners from 1st April, 2018, without a Partnership Deed and they introduced capitals of ₹ 35,000 and ₹ 20,000 respectively. On 1st October, 2018, A advanced loan of ₹ 8,000 to the firm without any agreement as to interest. The profit and Loss Account for the year ended 31st March, 2019 shows a profit of ₹ 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.

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Profit and Loss Adjustment Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Interest on Partner’s Loan			Profit and Loss	43,000
Aakriti 20,000 × (6/100) × (6/12)		600
Profit transferred to
Aakriti’s Capital	21,200
Bindu’s Capital	21,200	42,400
		43,000		43,000