T.S. Grewal Class 12 Chapter 1 Q.3 - Accounting for Partnership Firm Fundamentals

Question 3

P, Q and R are partners in a firm without a Partnership Deed. State, with reasons, how the following situations will be dealt with:

1. P used ₹50,000 belonging to the firm in his personal business and earned a profit of ₹5,000.
2. Q used some property of the firm and a loss of ₹10,000 was incurred.
3. P and Q purchased goods for the firm without consulting R.
4. Q wants to admit his son S as a new partner, but P does not agree.
5. R has given a loan to the firm and demands interest @ 12% p.a. (the bank lending rate).

Solution

1. (a) P must pay to the firm ₹50,000 together with the profit of ₹5,000, i.e. ₹55,000. A partner is an agent of the firm; any profit earned by using the firm’s money or property belongs to the firm.
2. (b) Q is liable to compensate the firm for the loss of ₹10,000, as the loss arose from his use of the firm’s property.
3. (c) The purchase is valid and binds the firm. Every partner has implied authority to buy goods in the ordinary course of business, and no public notice restricts P and Q.
4. (d) S cannot be admitted. A new partner can be admitted only with the consent of all the existing partners, and P does not agree.
5. (e) R is entitled to interest @ 6% p.a. only, not 12%. In the absence of an agreement, interest on a partner’s loan is allowed @ 6% p.a.