Question

Sonia and Shruti were partners in a firm sharing profits and losses in the ratio of 5 : 3. On 1st April, 2023 the balance in their fixed capital accounts were \u20b9 25,00,000 and \u20b9 15,00,000 respectively. The profit of the firm for the year ended 31st March, 2024 was \u20b9 24,00,000. Calculate their share of profit if : (i) the partnership deed is silent as to the payment of interest on capital. (ii) the partnership deed provides for interest on capital @ 10% per annum.

Hint:

If the deed allows interest on capital, distribute interest first, then share the balance in the agreed ratio.

Answer 1

Scenario (i): Deed is silent on interest on capital
Profit Sharing Ratio = 5:3
\[ \text{Sonia's share} = \frac{5}{8} \times 24,00,000 = \u20b9 15,00,000 \] \[ \text{Shruti's share} = \frac{3}{8} \times 24,00,000 = \u20b9 9,00,000 \] Scenario (ii): Interest on capital @ 10% is allowed

Sonia's capital = ₹25,00,000; Interest = ₹2,50,000

Shruti's capital = ₹15,00,000; Interest = ₹1,50,000
\[ \text{Total Interest} = 4,00,000 \] \[ \text{Remaining Profit} = 24,00,000 - 4,00,000 = 20,00,000 \] \[ \text{Sonia's share} = 2,50,000 + \frac{5}{8} \times 20,00,000 = 2,50,000 + 12,50,000 = \u20b9 15,00,000 \] \[ \text{Shruti's share} = 1,50,000 + \frac{3}{8} \times 20,00,000 = 1,50,000 + 7,50,000 = \u20b9 9,00,000 \] Final Outcome: In both scenarios, the distribution remains the same: Sonia receives ₹15,00,000, and Shruti receives ₹9,00,000.