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Loan from Partners

Interest on l...

Question

Interest on loan by partners is a charge against profits.

A

False

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B

True

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Q. In the absence of Partnership Deed, what are the rules relation to :
(a) Salaries of partners,
(b) Interest on partners’ capitals
(c) Interest on partners’ loan
(d) Division of profit, and
(e) Interest on partners’ drawings

Q. A and B are partners in a firm sharing profits in the ratio of 3 : 2. They had advanced to the firm a sum of ₹ 30,000 as a loan in their profit-sharing ratio on 1st October, 2017. The Partnership Deed is silent on interest on loans from partners. Compute interest payable by the firm to the partners, assuming the firm closes its books every year on 31st March.

Q. Sajal and Kajal are partners sharing profits and losses in the ratio of 2 : 1. On 1st April, 2018 their Capitals were: Sajal – ₹ 50,000 and Kajal – ₹ 40,000.
Prepare Profit and Loss Appropriation Account and the Partners' Capital Accounts at the end of the year after considering the following items:
(a) Interest on Capital is to be allowed @ 5% p.a.
(b) Interest on the loan advanced by Kajal for the whole year, the amount of loan being ₹ 30,000.
(c) Interest on partners' drawings @ 6% p.a. Drawings: Sajal ₹ 10,000 and Kajal ₹ 8,000.
(d) 10% of the divisible profit is to be transferred to Reserve.

Net profit for the year ended 31st March, 2019 is ₹ 68,460.
Note: Net profit means net profit after debit of interest on loan by the partner.

Interest on loan by partners is to the profits of the firm.

Q. Is Interest on Loan by partner debited to Profit and Loss Appropriation Account?

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