Anupam and Abhishek are partners. Their capital accounts showed balances of Rs. 1,50,000 and Rs. 2,00,000 respectively on April 01, 2019. Show the interest on capital for the year ending March 31, 2020 allowed, If the partnership deed provides for interest on capital @ 8% p.a. and the firm earned a profit of Rs. 14,000 during the year:

14,000

The correct answer is Option (4) → 14,000.

Available profit = 14,000

Interest on Anupam capital = 1,50,000 x 8/100
                                        = 12,000

Interest on Abhishek capital = 2,00,000 x 8/100
                                        = 16,000

Total interest = 12,000 + 16,000
                    = 28,000

Ratio of interest on capital = 12,000 : 16,000
                                       = 12:16
                                       = 3:4

Interest provided to Anupam = 14,000 x 3/7
                                           = 6,000

Interest provided to Abhishek = 14,000 x 4/7
                                            = 8,000

As profit is 14,000 so only that amount can be provided as interest on capital to partners.