A and B are partners with capital of ₹10,000 and ₹5,000 respectively. Loan given by A to the firm was of ₹10,000. There is no partnership deed. A and B expect 10% interest on Capital. Profit before interest on loan, on 31 march 2021 was of ₹2,000. Divisible Profit would be -
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹1,400.
6% interest on loan will be allowed as there is no partnership deed.
Loan = 10,000
Interest = 10,000 x 6/100
= 600
Profit = 2,000 before interest on loan
Net profit after interest = 2,000 - 600
= 1,400
This profit is transferred to profit and loss appropriation account. No interest on capital is allowed to partners as there is no deed. So, divisible profit is ₹1,400.