J and K are partners sharing profits and losses in the ratio of 3:1. Their capitals at the end of the financial year 2024- 2025 were Rs. 1,50,000 and Rs. 75,000 respectively. During the year 2024-2025, J's drawings were Rs. 20,000 and the drawings of K were Rs. 5,000, which had been duly debited to partner's capital accounts. Profit before charging interest on capital for the year was Rs. 16,000. The same had also been credited in their profit sharing ratio. K had brought additional capital of Rs. 16,000 on October 1, 2024. Calculate interest on capital @ 12% p.a. for the year 2024-2025 for J.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs. 18,960
Only closing capitals are given, so J's opening capital is worked back first: add back what reduced the capital during the year and take out what increased it. J brought no additional capital (that was K), so his whole opening capital earns interest for 12 months.
J's capital at the end = Rs. 1,50,000
Add drawings = Rs. 20,000, giving Rs. 1,70,000
Less share of profit credited = 16,000 × 3/4 = Rs. 12,000
J's opening capital = 1,70,000 − 12,000 = Rs. 1,58,000
Interest on capital = 1,58,000 × 12/100 = Rs. 18,960
Rs. 8,160 is K's interest (on Rs. 60,000 for the year and Rs. 16,000 for 6 months), not J's.
Note: The book's Illustration 6 says the profit “had also been debited” in the profit sharing ratio. That is a misprint: its own solution deducts the profit share as an amount credited to the capitals, as this question states.
NCERT (2026-27 edition):
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