12th2023-24

X and Y are partners sharing profits and losses in the ratio of 2 : 3 with capitals  ` 2,00,000 and  ` 3,00,000 respectively. On 1st October, 2022, X and Y gave loans of   ` 80,000 and  ` 40,000 respectively to the firm. Show distribution of profits/losses for the year ended 31st March, 2023 in each of the following alternative cases:
Case 1 : If the profits before interest for the year amounted to  ` 21,000.
Case 2 : If the profits before interest for the year amounted to  ` 3,000.
Case 3 : If the profits before interest for the year amounted to  ` 5,000.
Case 4 : If the loss before interest for the year amounted to  ` 1,400.

Answer:

Calculation of Interest on Loan

 

Interst on X’s advance = 80,000×6/100×6/12=2400

Interst on Y's advance = 40,000×6/100×6/12=1200

 

Case 1- If Profits before any interest for the year amounted to  ` 21,000

Profit and Loss Account for the year ended March 31, 2023
Dr.				Cr.
Particulars		( `)	Particulars	( `)
Interest on X’s Loan		2,400	Profit	21,000
Interest on Y’s Loan		1,200	(before  interest)
Profit transferred to
(Profit transferred to P&L appropriation a/c)
		17,400
		21,000		21,000

 

Profit and Loss appropriation Account for the year ended March 31, 2023
Dr.				Cr.
Particulars		( `)	Particulars	( `)
			Profit	17,400
			(before  interest)
Profit transferred to
X’s Capital A/c (17,400 × 2/5)	6,960
Y’s Capital A/c (17,400 × 3/5)	10,440	17,400
		21,000		21,000

 

Case 2- If Profits before any interest for the year amounted to  ` 3,000

Profit and Loss Account for the year ended March 31, 2023
Dr.				Cr.
Particulars	( `)	Particulars		( `)
Interest on X’s Loan	2,400	Profit (before interest)		3,000
Interest on Y’s Loan	1,200	Loss transferred to-
		X’s Capital A/c (600 × 2/5)	240
		Y’s Capital A/c (600 × (3/5)	360	600
	3,600			3,600

 

Profit and Loss appropriation Account for the year ended March 31, 2023
Dr.				Cr.
Particulars	( `)	Particulars		( `)
To P&L a/c	600
\(Net loss transferred P&L Appropriation a/c)		Loss transferred to-
		X’s Capital A/c (600 × 2/5)	240
		Y’s Capital A/c (600 × (3/5)	360	600
	3,600			3,600

 

 

Case 3- If Profits before any interest for the year amounted to  ` 5,000

Profit and Loss Account for the year ended March 31, 2023
Dr.				Cr.
Particulars		( `)	Particulars	( `)
Interest on X’s Loan		2,400	Profit (before interest)	5,000
Interest on Y’s Loan		1,200
Profit transferred to:
X’s Capital A/c (1400 × 2/5)	560
Y’s Capital A/c (1400 × 3/5)	840	1,400
		5,000		5,000

 

Profit and Loss Appropriation Account for the year ended March 31, 2023
Dr.				Cr.
Particulars		( `)	Particulars	( `)
Interest on X’s Loan		2,400	Profit (before interest)	5,000
Interest on Y’s Loan		1,200
Profit transferred to:
X’s Capital A/c (1400 × 2/5)	560
Y’s Capital A/c (1400 × 3/5)	840	1,400
		5,000		5,000

 

 

Case 4- If Loss before any interest for the year amounted to  ` 1,400

Profit and Loss Account for the year ended March 31, 2023
Dr.				Cr.
Particulars	( `)	Particulars		( `)
Loss (before interest)	1,400	By  P&L Appropriation A/c		5,000
Interest on X’s Loan	2,400	(Loss transferred to Profit and Loss A/c)
Interest on Y’s Loan	1,200
	5,000			5,000

 

Profit and Loss Appropriation Account for the year ended March 31, 2023
Dr.				Cr.
Particulars	( `)	Particulars		( `)
To P&L Appropriation A/c	5,000	Loss transferred to-
\(Net loss transferred from P&L a/c)		X’s Capital A/c (5,000 × 2/5)	2,000
		Y’s Capital A/c (5,000 × 3/5)	3,000	5,000
	5,000			5,000

 

 

Sita and Geeta 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, 2022. 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.

Answer:

Amount advanced by the Partners = ` 30,000

Profit sharing ratio = 3 : 2

Advanced by Sita =30,000×3/5=18,000

Advanced by Geeta =30,000×2/5=12,000

Time Period (from October 01, 2022 toMarch 31, 2022) = 6 months

Interest rate = 6% p.a.

Calculation of Interest on Advances

Interest on Sita' s advance=18,000×6/100×6/12=540

Interest on Geeta' s advance=12,000×6/100×6/12=360

Note: In the absence of a partnership agreement regardingrate of interest on loans and advances, interest is provided at 6% p.a.

 

 

Bat and Ball are partners sharing the profits in the ratio of 2 : 3 with capitals of  ` 1,20,000 and  ` 60,000 respectively. On 1st October, 2022, Bat and Ball gave loans of  ` 2,40,000 and  ` 1,20,000 respectively to the firm. Bat had allowed the firm to use his property for business for a monthly rent of  ` 5,000. The loss for the year ended 31st March, 2023 before rent and interest amounted to  ` 9,000. Show distribution of profit/loss.

Answer:

 

Profit and Loss Account for the year ended March 31, 2023
Dr.				Cr.
Particulars	( `)	Particulars		( `)
Loss (before Rent and interest)	9,000
Rent (5,000×12)	60,000	By  P&L Appropriation A/c
Interest on Bat’s loan	7,200	(Loss transferred to Profit and Loss A/c)
Interest on Ball’s loan	3,600			79,800
	79,800			79,800

 

Profit and Loss Appropriation Account for the year ended March 31, 2023
Dr.				Cr.
Particulars	( `)	Particulars		( `)
To P&L A/c	79,800
(Net loss transferred from P&L a/c)	60,000	Loss transferred to:
	7,200	Bat’s Capital A/c	31,920
	3,600	Ball’s Capital A/c	47,880	79,800
	79,800			79,800

Working Notes:
WN 1Interest on Partner’s Loan 

Interest on Bat' sloan=2,40,000×6/100×6/12=7,200

Interest on Ball' s loan=1,20,000×6/100×6/12=3,600

 

WN 2Distribution of Loss to the Partners 

Loss after Interest on Partners’ Loan = 9,000 + 60,000 + 7,200 + 3,600 = ` 19,800
Bat's Share of Loss=79,800×2/5=` 31,920

Ball's Share of Loss=79,800×3/5=` 47,880

 

Akhil, Sunil and Parvesh are partners sharing profits in the ratio of 3:2:1.Sunil had given loan to firm on 1st November, 2022 of 4,00,000. Interest payable was agreed @ 12% p.a. Interest was paid by cheque up to February, 2023 on 1st March, 2023 and balance was yet to be paid. Pass the Journal entries for interest on loan by partner.

Answer:

JOURNAL
Date	Particulars		LF	Dr. (Rs.)	Cr. (Rs.)
2023
March 31	Interest on Loan by Partner A/c	Dr.		16,000
	To Bank A/C				16,000
	(Interest paid for si× months up to February, 2023)
March 31	Interest on Loan by Partner A/c	Dr.		4,000
	To Loan by Vijay A/c				4,000
	(Interest for March, 2023 provided)
	Profit & Loss A/c .	Dr.		20,000
	To Interest on Loan by Partner A/c				20,000
	(Interest on Loan by Vijay transferred to the debit of Profit & Loss Account)

 

Working notes:

Loan by partner Sunil 4,00,000

Total interest on loan for 5 month = 4,00,000 × 12 × 5 / 100 × 12=20,000

Amount of interest paid from November to February for 4 month by cheque = 20,000×4/5=16,000

 

Akhil and Bimal are partners sharing profits in the ratio of 3 :2. Akhil gave loan to the firm of `1,00,000 on 1st October, 2022. On the same date, the firm gave loan to Bimal of `1,00,000. They do not have an agreement as to interest.

Akhil had also given his personal property for firm’s  godown at a monthly rent of `5,000.

Firm earns profit of `1,03,000 (before above adjustments) for the year ended 31st March, 2023. Show the distribution of profit for the year.

 

Answer;

Profit and loss account year ended 31 March, 2023
Particulars	`	Particulars	`
To interest on loan (Akhil) 1,00,000×6/100×6/12 To Rent (Akhil) 5,000×12 To Balance C/d	3,000     60,000 40,000	By net profit b/d	1,03,000
	1,03,000		1,03,000

 

Profit and loss appropriation account year ended 31 March, 2023
Particulars	`	Particulars	`
To Profit transferred Akhil’s Capital -40,000×3/5 Bimal’s Capital -40,000×2/5	24,000 16,000	By  Balance b/d	40,000
	40,000		40,000