ABC entered into partnership with no agreement as to sharing profit an...
Sharing of Profits
In the absence of a partnership agreement, profits are typically shared in proportion to the capital contributions made by each partner. Here, the capital contributions are:
- A: ₹1,00,000
- B: ₹80,000
- C: ₹70,000
The total capital contributed is ₹2,50,000.
- A's share: (1,00,000 / 2,50,000) × 100 = 40%
- B's share: (80,000 / 2,50,000) × 100 = 32%
- C's share: (70,000 / 2,50,000) × 100 = 28%
Thus, the profit-sharing ratio among A, B, and C will be 40:32:28.
Interest on Capital Advances
In most partnerships, partners are entitled to a certain rate of interest on their capital contributions and loans advanced to the firm. The typical rate of interest is:
- Generally 6% per annum, unless otherwise stated.
In this case, B has advanced ₹50,000 as a loan. Therefore, the interest payable to B on this amount would be calculated as follows:
- Interest = Principal × Rate × Time
- Interest = 50,000 × 6% × 1 = ₹3,000
Management Participation and Salary
Regarding B's claim for a salary of ₹6,000 per annum for participating in management, the following points are relevant:
- In a partnership without an explicit agreement, partners do not automatically receive a salary for participating in management.
- Salaries can only be claimed if it is mutually agreed upon or specified in the partnership deed.
Since there is no partnership agreement specifying B's entitlement to a salary, he is not entitled to the ₹6,000 salary.
In summary, profits are shared in proportion to capital contributions, interest on loans is generally 6%, and partners do not have a right to salaries unless agreed upon.