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Question
Deb, Riza and Ved entered into a partnership on 1st July, 2023, without any agreement as to profit sharing, except that Deb guaranteed that Ved’s share of profit, after considering interest into account, would not be less than ₹ 8,500 per annum. The initial capital provided by the partners was as follows:
| Deb | ₹ 60,000 |
| Riza | ₹ 20,000 |
| Ved | 12,000 (increased on the following 1st January, 2024, to ₹ 16,000) |
In addition to the above capital, Deb and Riza gave temporary loans to the partnership firm as follows:
- Deb advanced ₹ 18,000 on 1st October, 2023, and was repaid on 1st April following.
- Riza advanced ₹ 40,000 on 1st September, 2023, and was repaid along with interest, on 1st December, 2023.
The profit of the firm for the year ended 31st March, 2024, before providing for any interest was ₹ 21,000.
You are required to prepare for the year 2023-24:
- Profit and Loss Appropriation Account.
- Riza’s Loan Account.
- Ved’s Capital Account.
Solution
| Dr. | Profit & Loss Appropriation Account for the year ending 31st March, 2024 | Cr. | |||
| Particulars | (₹) | (₹) | Particulars | (₹) | (₹) |
| To Deb’s Capital A/c | 6,620 | 4,740 | By Profit & Loss A/c | 21,000 | |
| (1,880) | Less: Interest on Loan | 1,140 | |||
| To Riza’s Capital A/c | 6,620 | Deb | 540 | ||
| To Ved’s Capital A/c | 6,620 | 8,500 | Riza | 600 | |
| 1,880 | |||||
| 19,860 |
19,860 |
||||
Working Notes:
Interest on loan:
Deb = `18,000 xx 6/100 xx 6/12` = ₹ 540
Riza = `40,000 xx 6/100 xx 3/12` = ₹ 600
| Riza’s Loan Account | |||||
| Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) |
| 1.12.2023 | To Bank | 40,600 | 1.9.2023 | By Bank A/c | 40,000 |
| 1.12.2023 | By Interest on Loan | 600 | |||
| 40,600 | 40,600 | ||||
| Ved’s Capital Account | |||||
| Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) |
| 31.3.2024 | To Balance c/d | 24,500 | 1.7.2023 | By Bank A/c | 12,000 |
| 1.1.2024 | By Bank A/c | 4,000 | |||
| 31.3.2024 | By P/L Appropriation A/c | 6,620 | |||
| 31.3.2024 | By Deb’s Capital | 1,880 | |||
| 24,500 | 2,500 | ||||
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