A and B are in partnership with fixed capital of ₹40,000 and ₹30,000 respectively. During the year 2021-22, A withdrew ₹5000 and B ₹7500. Profits before providing interest on Capital was ₹25000. A and B shared profits in the ratio of 3 : 2. Calculate the amount of interest on capital payable to both the partners for the financial year 2021-2022, if it is allowed @12% p.a.

A. ₹4,800   B. ₹3,600

The correct answer is Option (2) - A. ₹4,800   B. ₹3,600

As the capital is fixed, interest is calculated on fixed capital. There is no need for any adjustment regarding interest on drawings or anything else.

A's fixed capital = ₹40000
Rate of interest = 12% p.a.
Interest = 40000 x 12/100
            = ₹4800

B's fixed capital = ₹30000
Rate of interest = 12% p.a.
Interest = 30000 x 12/100
            = ₹3600