Use app×
Join Bloom Tuition
One on One Online Tuition
JEE MAIN 2025 Foundation Course
NEET 2025 Foundation Course
CLASS 12 FOUNDATION COURSE
CLASS 10 FOUNDATION COURSE
CLASS 9 FOUNDATION COURSE
CLASS 8 FOUNDATION COURSE
0 votes
521 views
in Accounting for Partnership – Basic Concepts by (25.6k points)
closed by

Aby and Anu are partners sharing profits in the ratio of 4:1. Their capital a/c balances are Aby : 4,00,000 Anu : 5,00,000 Profit made during the year was Rs. 1,00,000. Anu is of the opinion that their agreement must include a provision for interest on capital @10% p.a. Otherwise the profit sharing ratio must be made equal. Why did Anu put forward such an opinion? Will it be worthwhile to her if such changes are made. Which of the above condition is more advantageous to her. Give your advice.

1 Answer

+1 vote
by (27.3k points)
selected by
 
Best answer

Profit sharing ratio of Aby and Anu is 4:1. Net Profit = 1,00,000 As per this ratio Aby will get Rs. 80,000 (1,00,000 × 4/5) and Anu will get 20,000 (1,00,000 × 1/5) as their share of profit. But Anu has contributed Rs. 1,00,000 more than Aby’s capital. Now Anu is in a disadvantageous position. Conditions: 

1. If there is a provision for interest on capital @10%.

Anu’s interest on capital = 5,00,000 ×\(\frac{10}{100}\)= 50,000

Her share of profit = (Net Profit – Interest on capital of Aby and Anu) × 1/5 

=[1,00,000 – (40,000 + 50,000)] × \(\frac{1}{5}\)

= 1,00,000 – 90,000 × \(\frac{1}{5}\) =10,000 × = 2,000 

Anu will get interest on capital = 50,000+ share of profit 2000 = 52,000.

2. Profit sharing ratio made equal: 

Abu’s share of profit = 1,00,000 × \(\frac{1}{2}\) = 50,000 

Anu’s share of profit = 1,00,000 × \(\frac{1}{2}\) = 50,000 So First condition is more advantageous to Anu.

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.

...