hello guys!!
i have a very peculiar doubt, a parntership firms NP is below the Interest on Capital amount say if interest is 50000 then NP is only 25000 , in this type of case how should i account in appropriation a/c and that a mg.partner has to be paid remuneration out of profits pls suggest as of now i have taken only remuneration and i guess interest on capital will be applicable here !! just pls reply to my confusion
Amit
The remmuneration paid to the directors is taken on the NP
their is no use of Interest on Capital
Abhay there is no director in the partnership firm.
If there is inadequate profit as in the case mentioned by you.
No remuneration is provided to partner (eg. salery etc.) But if ity is agreed between the partners to provide interest on capital then that inadequate profit is distributed among the partners in their capital ratio.
Note: - This rule is applicable only in the case where the profits are inadequate i.e; Interst on capital is more than the net profit.
Directors are for Companies and not for partnership.
However if it is a company, it may dealt as follows:-
While calculating remuneration for M.D's you calculate NP under section 349 of Companies Act.
U/s 349 you take GP and deduct only those items which are allowed by 349 and add only those which are allowed.
As far as I remember 'interest on capital' is not taken into consideration.
Hope I am right, lol!
MR. CA DHIRAJ SINGH IS RIGHT.
Thank you sir
I want how to calculate interest on capital in a partership fim having any rate of interest.
CAclubindia
