Question

Sabu and Sekhar commenced business in partnership on 1^st January, 2005. No written agreement was in force between them. They contributed Rs. 40,000 and Rs. 10,000 respectively as capital. In addition, Sabu advanced Rs. 20,000 on 1^st July, 2005 as loan to the rm. Sabu met with an accident on 1^st April, 2005 and could not attend the partnership business up to 30^th June, 2005. The . profits for the year ended on 31^st December, 2005 amounted to Rs. 50,600. Dispute arise between them for sharing profits. Sabu claims:

• He should get an interest @ 10% p.a. on capital. Sekhar claims: 
• Net Profit should be shared equally 
• He should be allowed remuneration of Rs. 1,000 p.m. during the period of Sabu’s illness. 

You are required to: 

1. In your opinion how much profit will each partner get? 

2. State your reason.

Answer 1

In the absence of agreement, partners are not entitled to interest on capital contributed by them. So Sabu’s claim is not admitted. 

1. In the absense of agreement, partners are not entitled to any salary or other remuneration.

2. In the absence of written agreement, partners are entitled to share profits equally, Here, net profit is divided equally among Sabu and Sekhar. 

Profit for the year = 50,600 

Less: Interest on Sabus loan (20000 × 6/100 × 6/12) = 600 

The actual profit = 50,000 

In the absence of agreement, partners are entitled to interest on loan (to the firm) at the rate of 6% p.a. Sabu’s share of profit = 50,000 × \(\frac{1}{2}\) = 25000 

Stephen’s share of profit = 50000 × \(\frac{1}{2}\) = 25000.