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.

₹12,000 and 16,000

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 = ₹28000.

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