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Amit and Mahesh were partners in a fast-food corner sharing profits and losses in ratio 3:2

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Amit and Mahesh were partners in a fast-food corner sharing profits and losses in ratio 3:2

by Chief of LearnyVerse
(271k points)
in Class 10th
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Read the following hypothetical text and answer the given questions:

Amit and Mahesh were partners in a fast-food corner sharing profits and losses in ratio 3:2. They sold fast food items across the counter and did home delivery too. Their initial fixed capital contribution was ₹1,20,000 and ₹80,000 respectively.

At the end of first year their profit was ₹ 1,20,000 before allowing the remuneration of ₹.3,000 per quarter to Amit and ₹.2,000 per half year to Mahesh. Such a promising performance for first year was encouraging, therefore, they decided to expand the area of operations.

For this purpose, they needed a delivery van, a few Scotties and an additional person to support. Six months into the accounting year they decided to admit Sundaram as a new partner and offered him 20% as a share of profits along with monthly remuneration of ₹ 2,500. Sundaram was asked to introduce ₹1,30,000 for capital and ₹.70,000 for premium for goodwill. Besides this Sundaram was required to provide Rs.1,00,000 as loan for two years.

Sundaram readily accepted the offer. The terms of the offer were duly executed and he was admitted as a partner

1. Remuneration will be transferred to _______ of Amit and Mahesh at the end of the accounting period.

a. Capital account.

b. Loan account.

c. Current account.

d. None of the above

2. Upon the admission of Sundaram the sacrifice for providing his share of profits would be done:

(a) by Amit only.

(b) by Mahesh only.

(c) by Amit and Mahesh equally.

(d) by Amit and Mahesh in the ratio of 3:2.

3. Sundaram will be entitled to a remuneration of _______at the end of the year.

4. While taking up the accounting procedure for this reconstitution the accountant of the firm Mr. Suraj Marwaha faced a difficulty. Solve it be answering the following:

For the amount of loan that Sundaram has agreed to provide, he is entitled to interest thereon at the rate of ________.

1 Answer

by Chief of LearnyVerse
(271k points)
0 votes

1. (c) Current Account

Explanation: Partners are following fixed Capital Method

2. (d) By Amit and Mahesh in the ratio of 3:2

Explanation: The sacrifice ratio will be the same as the profits sharing ratio.

3. Rs.15,000

Explanation: Amit remuneration ₹2,500 monthly

₹2,500 x 6 = 15,000

4. 6% p.a.

Explanation: According to the Indian Partnership Act 1932, in the death or absence of partner will be given @ 6% p.a. Interest on Loan.

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