On 1st April, 2021, 'Nitu' and 'Ranu' are partners with capital of ₹20,000 and ₹30,000 respectively. On the same day, Nitu gave a loan of ₹4,000 to the firm. The profit for that year is ₹5,240. Prepare a profit and loss appropriation account in the absence of a partnership agreement, while the year ends on March 31, 2022.
Answer (1)
To prepare the Profit and Loss Appropriation Account for Nitu and Ranu, we need to distribute the profit for the year among the partners in the absence of a partnership agreement. As per general business practices, if there is no partnership agreement, profits are shared equally among partners.
Here are the steps to prepare the Profit and Loss Appropriation Account:
1. Profit of the Firm:
The profit for the year is given as ₹5,240.
2. Distribution of Profit:
In the absence of a partnership agreement:
Usually, partners share profits equally.
Interest on loan to partners from the firm is not charged unless specified.
No interest on capital is provided unless agreed upon.
3. Profit and Loss Appropriation Account:
Particulars Profit for the year Total Amount (₹) 5 , 240 5 , 240 Particulars Nitu’s Share of Profit Ranu’s Share of Profit Total Amount (₹) 2 , 620 2 , 620 5 , 240
Note:
The loan given by Nitu (₹4,000) does not affect the Profit and Loss Appropriation Account directly. It is considered a liability and might earn interest, which would be treated separately if specified.
Thus, based on the above, each partner receives ₹2,620 as their share of the profit for the year because the profits have been split equally.
