Parul and Aruna, school time friends, …

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Parul and Aruna, school time friends, met at the school reunion. Parul had become a fashion designer and had worked for a few years with a leading fashion designer. Aruna, after Accountancy project 5.... completing her MBA in Marketing, had worked with a leading retail store. At the meeting they had a brief discussion about setting up their own garment stores for teens and agreed to meet later and discuss the business prospects. They met again to discuss the possibility of starting the business and after discussions decided to set up ready-made garments stores exclusively for teenagers with a high disposable family incomes and who follow latest fashion trends. They decided to open their first store on 15th April, 2020. They decided to produce and sell clothes which were not expensive as it will give the customer value for money and, in the process, their turnover will increase due to which the profit will also be high. They decided to open their flagship store in Select City Walk, Saket, New Delhi. The name decided was C4T, a short form of Clothes 4 Teens. They discussed and finalised the business plan, capital requirement and sources, etc. Parul was to design the clothes and source the material besides identifying tailoring source, which was to be outsourced. Aruna, besides looking after marketing, was to identify and rent a suitable place for the store, renovate it and take care of the legal aspects. It was agreed that each partner will initially contribute 10 lakhs towards capital. Aruna employed Bikram, an experienced accountant, and requested him to draw the Partnership Deed and get the firm registered under the applicable laws. She gave him the terms of partnership agreed between her and Parul. Aruna located a shop measuring 800 square feet, finalised the rent and entered into an agreement. It was agreed that rent for the shop will be ? 15,000 per month starting from 1st April, 2020 and in between period will be used for furnishing the shop. A security deposit equal to six months' rent was to be given. A bank account was opened with the State Bank of India in the name of C4T in which they deposited cheques of 10 lakhs each. Cheques for 90,000 as security deposits for rent, 7,000 as Security Deposit for Electricity were issued. A contract was signed for *3,50,000 for renovation of the outlet which was paid. A website was got developed from a local developer to attract mail orders. Website designing and hosting expense came to and printer was purchased for 50,000. 1,00,000. Rent for website space was 20,000 payable from 1st April, 2021. A computer The firm took a term loan of 10 lakhs from the bank repayable in 20 equal quarterly instalments. First instalment was to be paid on 30th June, 2020. The bank granted loan interest being @ 12% per annum. Loan repayment schedule was as follows: Date June 30, 2020 Principal (2) 50,000 September 30, 2020 December 31, 2020 March 31, 2021 50,000 50,000 50,000 Interest (2) 30,000 Instalment (2) 80,000 28.500 27,000 25.500 78,500 77,000 75,500

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