Complete the sequence where interest on capital has to be provided as per partnership deed, but available profits are not sufficient to provide full amount of Interest on capital.
A. If it is appropriation, calculate interest on capital for all partners at given rate
B. Divide the available amount in the capital ratio among the partners
C. Calculate ratio between capital of partners
D. Consider the partnership deed and decide whether interest on capital is a charge or an appropriation
E. Consider the available profit
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → D, A, E, C, B
The steps follow the order in which the deed and the figures are used:
(D) Consider the partnership deed and decide whether interest on capital is a charge or an appropriation — the deed decides the treatment first.
(A) If it is appropriation, calculate interest on capital for all partners at given rate — the full interest due is worked out.
(E) Consider the available profit — it is compared with the interest due and found to be less.
(C) Calculate ratio between capital of partners — with interest at one rate, this is the ratio of interest due.
(B) Divide the available amount in the capital ratio among the partners — interest is restricted to the profit available.
As an appropriation, interest on capital is allowed only out of profits, so when profits fall short the whole profit is shared in the ratio of interest on capital.
NCERT (2026-27 edition): |