Junior - I - Accountancy
Bat and ball are partners sharing the profit in the ratio of 2:3 with capitals 120000 and 60000 resp. On 1st Oct 2016 bat and ball granted loans of 240000 and 120000 resp from the firm. The loss for the year ended 31st mar 2017 before any interest amounted to 9000 . bat had allowed the firm to use his property for business for monthly rent of 5000 . show the distribution of P/L
In context of the above query we will state that rent that is paid to a partner is always treated as a charge against profits and not an appropriation. Therefore, the figure of Rs 60,000 (i.e. payment of Rs 5,000 p.m.) would be debited to P&L Account. Accordingly, we will start our P&L Appropriation Account with 69,000 (i.e. 9,000 + 60,000) as figure of loss for the year ending March 31, 2017.
For the loans granted by Bat and Ball, interest would be paid at 6% p.a. as per the Partnership Act, 1932.
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