Rama and Shama are two partners sharing profits and losses in ratio of 3 : 5. Their capital accounts showed balances of ₹1,50,000 and ₹2,00,000 on 1 April 2021. Calculate interest on capital to be paid for the year ending 31 March 2022, if partnership deed provides for interest on capital @10% and the firm has earned a profit of ₹28,000 during the year.
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹12,000 and ₹16,000.
Interest on Rama Capital = 1,50,000 x 10/100
= ₹15,000
Interest on Shama capital = 2,00,000 x 10/100
= ₹20,000
Total interest = 15,000 + 20,000
= 35,000
Profit for the year = ₹28,000.
As profit is less than total interest so appropriation is made so total available profit is shared between partners as interest.
Appropriation ratio = 15,000 : 20,000
= 3:4
Interest of Rama = 28000 x 3/7
= ₹12,000
Interest of Shama = 28,000 x 4/7
= ₹16,000