Partnership

Admission

Medium

Case Study

Read the following information to answer.

Arun and Ram are partners in a restaurant business sharing profits and losses in capital ratio. Their fixed capital from the beginning of the firm was Rs. 2,00,000 and Rs. 1,50,000 respectively.

The profit for the year ended 31 March 2022 before the appropriation of Salary and Interest on Capital was Rs. 2,20,000. Ram is allowed a salary of Rs. 2,000 per quarter. Interest on capital is allowed to all partners @ 10 % p.a.

Due to the further expansion of the business, they decided to enter Sanjeev as a new partner for $\frac{1}{5}$ share in profits. It was agreed that Sanjeev will bring Rs. 1,00,000 as capital and Rs. 50,000 as his share of Goodwill. It was decided that he will give Rs. 1,00,000 as loan to the firm for 3 years.

The amount of salary to be shown in the Dr. side of P & L Appropriation A/C will be:

Rs. 2,000

Rs. 8,000

Rs. 12,000

Rs. 24,000

✅ Correct Option: 2

Ram's salary = Rs. 2,000 per quarter x 4 quarters = Rs. 8,000 per year. This amount is shown on the debit side of P&L Appropriation Account.

Question 47

Interest on capital will be shown on the Dr. side of Profit and Loss Appropriation A/c and ________ side of Partner's ________ A/c.

Question 48

Rate of Interest on loan given by Sanjeev will be:

Question 49

The amount of distributed profits of both the partner's will be:

Question 50

The new profit sharing ratio of Arun, Ram and Sanjeev will be:

The amount of salary to be shown in the Dr. side of P & L Appropriation A/C will be:

Solution

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