A & B are partners sharing profits and losses in ratio of 2:3 with capitals of ₹2,00,000 and ₹1,00,000 respectively. Drawings are made by partner of ₹5,000 per month. Interest on drawings is to be charged @ 10% p.a. A gives guarantee to B for his share of profit of ₹10,000. If any deficiency arises, it will be borne by A. A gives a loan of ₹20,000 to firm at which interest is to be provided @ 8% p.a.

If partnership deed provide interest on capital @6% p.a. as a charge on the profit and profit for the year is ₹2,000 after all adjustments. What will be the profit or loss after this adjustment?

₹16,000 loss

The correct answer is option 1- ₹16,000 loss.

Total capital of both partners = 2,00,000 + 1,00,000
                                               = ₹3,00,000

Interest on capital of both partners = 3,00,000 x 6/100
                                                         = ₹18,000

Profit after this adjustment = 2,000-18,000
                                            = ₹16,000(loss)

Note: The phrase “profit for the year is ₹2,000 after all adjustments” implies that all items such as interest on drawings, interest on loan, salary/commission (if any), etc., have already been taken into account while arriving at this figure. Therefore, these items should not be added or adjusted again. Only those adjustments specifically mentioned to be done after this stage (like interest on capital, if treated as a charge) should be considered further