Question

Harshad and Dhiman are in partnership since 1st April, 2017. No partnership agreement was made. They contributed Rs 4,00,000 and 1,00,000 respectively as capital. In addition, Harshad advance an amount of Rs 1,00,000 to the firm on 1st October, 2017. Due to long illness, Harshad could not participate in business activities from 1st August to 30th September, 2017. The profit for the year ended 31st March, 2018 amounted to Rs 1,80,000. Dispute has arisen between Harshad and Dhiman. Harshad Claims: 

(i) He should be given interest @ 10% per annum on capital and loan; 

(ii) Profit should be distributed in proportion of capital; Dhiman Claims: 

(i) Profit should be distributed equally; 

(ii) He should be allowed Rs 2,000 p.m. as remuneration for the period he managed the business in the absence of Harshad; 

(iii) Interest on Capital and loan should be allowed @ 6% p.a. You are required to settle the dispute between Harshand and Dhiman. Also prepare Profit and Loss Appropriation Account.

Answer 1

Harshad claims:

(i) it cannot claim interest on capital to Indian partnership Act 1932 he is entitled only for 6% interest on loan.

(ii) In absence to any agreement profit are distributed equally, according to Indian partnership Act 1932.

Dhiman Claims:

(i) it will be accepted, according to Indian partnership Act 1932

(ii) He is not entitled for any remuneration because there is no agreement on matter of remuneration 

(iii) It is no interest on capital is allowed whereas 6% interest for loan should be given.