A and B are partners sharing profit in the ratio of 3:2. On 31st March, 2023, the Capital Account balance stood as A-₹1,29,000 and B- ₹86,000. The divisible profit of ₹50,000 has been distributed between A and B accordingly and Interest on capital @ 10% p.a. has also been credited. A has also obtained a salary @ ₹10,000 annually.
Calculate Interest on B's capital.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → ₹6,000
B’s closing capital of ₹86,000 already includes his share of profit and his interest on capital, so the opening capital has to be found first. Interest is 10% of the opening capital.
B’s share of profit = 50,000 × 2/5 = ₹20,000
Opening capital + interest = 86,000 − 20,000 = ₹66,000
Opening capital × 110% = 66,000
Opening capital = 66,000 ÷ 1.1 = ₹60,000
Interest on B’s capital = 60,000 × 10% = ₹6,000