and are partners sharing profits in the ratio . The capitals introduced by and are ₹ and ₹ respectively. Interest on capital is allowed to partners The net profit of the firm for the year ending March 31st, 2025 is ₹ . Calculate the amount of Interest on Capital to be allowed to each partner.
- A₹ ; ₹
- B₹ ; ₹
- C₹ ; ₹
- D₹ ; ₹
Solution & Step-by-step Explanation
Let us first calculate the full interest due to both partners: However, the available profit is only ₹ . Since Interest on Capital is an appropriation of profit (and nothing mentions treating it as a charge), it must be restricted to the maximum extent of available profits.The available profits are distributed in the ratio of interest due to each partner:
Allocating the available profit of ₹ in this ratio:
Allocating the available profit of ₹ in this ratio: