Sumit and Namit are partners sharing profits in the ratio of 3:2

31 :- Sumit and Namit are partners sharing profits in the ratio of 3:2. They contribute Rs 1,00,000 and Rs 50,000 respectively towards capital. Compute interest on capital and show distribution of profit in the following cases:
(i) When partnership deed was silent as to the interest on capital @10% p.a. and profit for the year is Rs 50,000.
(ii) When partnership Deed provides for interest on capital @10% p.a. and the profit for the year is Rs 15,000.
(iii) When the partnership deed provides for interest on capital @12% p.a. and profit for the year is Rs 23,000.
(iv) When the partnership Deed provides for interest @5% p.a. and loss for the year is Rs 8,000.
(v) When partnership deed provides for interest on capital @5% p.a. and profit for the year is Rs 3,000.
(vi) When partnership deed provides for interest on capital @5% p.a. even if it involves the firm in loss and the profit for the year is Rs 6,000.

Solution:- (i) Interest on capital will not be allowed
Distribution of profits :-
Sumit = 50,000 x 3/5 = Rs 30,000
Namit = 50,000 x 2/5 = Rs 20,000

(ii) Calculation of interest on capital of Sumit and Navit
Sumit = 1,00,000 x 10/100 = Rs 10,000
Navit = 50,000 x 10/100 = Rs 5,000
Profit is not left for distribution

(iii) Calculation of interest on capital
Sumit = 1,00,000 x 12/100 = Rs 12,000
Navit = 50,000 x 12/100 = Rs 6,000

Distrbution of profits:-
Distributable profit = 23,000 – 18,000 = Rs 5,000
Sumit = 5,000 x 3/5 = Rs 3,000
Navit = 5,000 x 2/5 = Rs 2,000

(iv) Interest on capital will not be provided
Distribution of loss:-
Sumit = 8,000 x 3/5 = Rs 4,800
Navit = 8,000 x 2/5 = Rs 3,200

(v) Calculation of interest on capital
Sumit = 1,00,000 x 5% = Rs 5,000
Navit = 5,000 x 5% = Rs 2,500
But enough profits are not available for distribution of whole amount of Interest on capitals
therefore, profit will be distributed in the ratio of their Interest on capital i.e, 2:1 as their interest on capital

Distribution of profits
Sumit = 3,000 x 2/3 = Rs 2,000
Navit = 3,000 x 1/3 = Rs 1,000
No profit will be left for distribution

(vi) Calculation of interets on capital
Sumit = 1,00,000 x 5/100 = Rs 5,000
Navit = 50,000 x 5/100 = Rs 2,500
But available profits are of Rs 6,000. Still we will provide whole amount of Interest on capital since it is a charge against profit as per their partnership deed.

Distributable loss :- 6,000 – 5,000 – 2,500 = Rs 1,500
Distribution of loss:
Sumit = 1,500 x 3/5 = Rs 900
Navit = 1,500 x 2/5 = Rs 600