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Nirmal and Pawan are partners sharing profits in the ratio of 3 : 2. The firm had given a loan to Pawan of ₹5,00,000 on 1st April, 2024. Interest was to be charged @ 10% p.a. The firm took a loan of ₹2,00,000 from Nirmal on 1st December, 2024. Before giving effect to the above, the firm incurred a loss of ₹10,000 for the year ended 31st March, 2025. Determine the amount to be transferred to the Profit & Loss Appropriation Account.
Interest on the firm’s loan to Pawan is charged @ 10% p.a. (as agreed) for the full year and is an income of the firm. Interest on Nirmal’s loan to the firm is allowed @ 6% p.a. (no rate agreed) for 4 months (1st December, 2024 to 31st March, 2025).
Profit & Loss Account (for the year ended 31st March, 2025)
| Particulars (Dr.) | ₹ | Particulars (Cr.) | ₹ |
|---|---|---|---|
| To Net Loss b/d | 10,000 | By Interest on Loan to Pawan (5,00,000 × 10%) | 50,000 |
| To Interest on Nirmal’s Loan (2,00,000 × 6% × 4/12) | 4,000 | ||
| To Profit transferred to P & L Appropriation A/c | 36,000 | ||
| Total | 50,000 | Total | 50,000 |
Amount to be transferred to the Profit & Loss Appropriation Account = ₹36,000.
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Chapter 1 Q.10 - Accounting for Partnership Firm Fundamentals", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 1 - Accounting for Partnership Firm – Fundamentals.
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