Read the following passage and answer the following question.

Shivay and Nitya are partners sharing profits and losses in the ratio of 7: 3. Their Capital Accounts as on 1st April, 2021 stood at Shivay- 5,00,000, Nitya- 4,00,000. Both partners are allowed interest on capital @ 5% p.a. Drawings of Shivay and Nitya during the year ended 31st March, 2022 were ₹72,000 and ₹50,000 respectively. Profit for the year before allowing interest on capital and salary to Nitya @6000 per month amounted to ₹8,00,000. 10% of the divisible profit is to be set aside as General Reserve.

What amount of profit is transferred to general reserve?

₹68,300

The correct answer is option 4- ₹68,300.

Profit is ₹8,00,000
Interest on capital is 5%p.a.
Partner's capital = 5,00,000 + 4,00,000
                           = 9,00,000
Interest = 9,00,000 x 5/100
              = ₹45,000

Salary to Nitya = 6,000 x 12
                        = ₹72,000

Profit after interest and salary = 8,00,000 - 45,000 - 72,000
                                                = 6,83,000

10% is transferred to general reserve = 6,83,000 x 10/100
                                                             = ₹68,300