Question

X and Y are partners with a profit sharing ratio of 1 : 2 with capitals of Rs 4,00,000 and Rs 6,00,000 respectively. On 1st October, 2014 X and Y granted loans of Rs 1,00,000 and Rs 60,000 respectively to the firm. Distribute the profit/losses amongst the partners for the year ended 31st March, 2015 in each of the following cases:

Case (a) If the profit before interest for the year amounted to Rs 12,000.

(b) If the profit before interest for the year amounted to Rs 3,000.

(c) If the loss before interest for the year amounted to Rs 7,500.

Answer 1

Case(a) PROFIT AND LOSS ACCOUNT
Dr. for the year ending on 31st March, 2015 Cr.

$\begin{array}{cccc}\text{Particulars}& Rs& \text{Particulars}& Rs\\ \text{Interest on Loan:}& & \text{Profit before interest}& 12,000\\ X3,000& & & \\ Y\underset{–}{1,800}& 4,800& & \\ \text{Net Profit transferred to:}& & & \\ \text{Profit \& Loss Appropriation A/c}& 7,200& & \\ & \underset{–}{\overline{12,000}}& & \underset{–}{\overline{12,000}}\end{array}$

PROFIT AND LOSS APPROPRIATION ACCOUNT
Dr. for the year ending on 31st March, 2015 Cr.

$\begin{array}{cccc}\text{Particulars}& Rs& \text{Particulars}& Rs\\ \text{Net Profit transferred to:}& & \text{Profit and Loss A/c}& 7,200\\ \text{X's Capital A/c}2,400& & \text{(Profit for the year)}& \\ \text{Y's Capital A/c}\underset{–}{4,800}& 7,200& & \\ & \underset{–}{\overline{7,200}}& & \underset{–}{\overline{7,200}}\end{array}$

Case (b) PROFIT AND LOSS ACCOUNT
Dr. for the year ending on 31st March, 2015 Cr.

$\begin{array}{cccc}\text{Particulars}& Rs& \text{Particulars}& Rs\\ \text{Interest on Loan:}& & \text{Profit before interest}& 3,000\\ X3,000& & \text{Net Loss transferred to:}& \\ Y\underset{–}{1,800}& 4,800& \text{X's Capital A/c}600& \\ & & \text{Y's Capital A/c}\underset{–}{1,200}& 1,800\\ & \underset{–}{\overline{4,800}}& & \underset{–}{\overline{4,800}}\end{array}$

Case (c) PROFIT AND LOSS ACCOUNT
Dr. for the year ending on 31st March, 2015 Cr.

$\begin{array}{cccc}\text{Particulars}& Rs& \text{Particulars}& Rs\\ \text{Loss before interest}& 7,500& \text{Net Loss transferred to:}& \\ \text{Interest on Loan:}& & \text{X's Capital A/c}4,100& \\ X3,000& & \text{Y's Capital A/c}\underset{–}{8,200}& 12,300\\ Y\underset{–}{1,800}& 4,800& & \\ & \underset{–}{\overline{12,300}}& & \underset{–}{\overline{12,300}}\end{array}$

Notes: (i) Interest on X's Loan =Rs $1,00,000\times \frac{6}{100}\times \frac{6}{12}=Rs3,000$

(ii) Interest on Y's Loan =Rs $60,000\times \frac{6}{100}\times \frac{6}{12}=Rs1,800$