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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Harshad and Dhiman are in partnership but have no Partnership Deed. On 1st October 2024, Harshad advanced a loan of ₹1,00,000 to the firm. The net profit of the firm for the year ended 31st March 2025, before allowing for any of the following claims, was ₹1,80,000.
Harshad claims: (a) interest on capital @ 10% p.a.; (b) interest on his loan @ 10% p.a.; and (c) that profit be shared in the ratio of capital.
Dhiman claims: (a) profit be shared equally; (b) a salary of ₹2,000 per month for managing the business during Harshad’s illness; and (c) interest on Harshad’s loan @ 6% p.a. only.
Settle the dispute and prepare the Profit & Loss Account and the Profit & Loss Appropriation Account.
Settlement (in the absence of a Partnership Deed):
Profit & Loss Account for the year ended 31st March 2025
| Particulars (Dr.) | ₹ | Particulars (Cr.) | ₹ |
|---|---|---|---|
| To Interest on Harshad’s Loan (₹1,00,000 × 6% × 6/12) | 3,000 | By Net Profit (before interest) | 1,80,000 |
| To Profit transferred to P & L Appropriation A/c | 1,77,000 | ||
| Total | 1,80,000 | Total | 1,80,000 |
Profit & Loss Appropriation Account for the year ended 31st March 2025
| Particulars (Dr.) | ₹ | Particulars (Cr.) | ₹ |
|---|---|---|---|
| To Profit transferred to Capital A/cs: | By Profit & Loss A/c | 1,77,000 | |
| Harshad | 88,500 | ||
| Dhiman | 88,500 | ||
| Total | 1,77,000 | Total | 1,77,000 |
Note: Interest on a partner’s loan is a charge against profit and is therefore debited to the Profit & Loss Account, not the Appropriation Account.
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.5 - 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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