Varun and Karan are partners sharing profits and losses in the ratio of 2:1. Their capitals at the end of the financial year 2024-25 were Rs. 1,80,000 and Rs. 90,000. During the year 2024-25, drawings of Varun and Karan were Rs. 30,000 and Rs. 10,000 respectively, which had been duly debited to partner's capital accounts. Profit before charging interest on capital for the year was Rs. 24,000, the same had also been distributed in their profit sharing ratio. Further Karan brought additional capital of Rs. 20,000 on December 31, 2024. Calculate interest on capital for Varun @ 10% p.a. for the year 2024-25.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs. 19,400
Interest on capital is allowed on the opening capital. When only the closing capital is given, the opening capital is worked back: add the drawings that reduced it and take off the share of profit that increased it.
Varun’s closing capital = Rs. 1,80,000
Add drawings = Rs. 30,000, giving Rs. 2,10,000
Less share of profit = Rs. 24,000 × 2/3 = Rs. 16,000
Opening capital = Rs. 2,10,000 − Rs. 16,000 = Rs. 1,94,000
Interest @ 10% = Rs. 1,94,000 × 10/100 = Rs. 19,400
The additional capital of Rs. 20,000 was brought in by Karan, so it does not affect Varun’s interest.
Note: NTA picked this question from an NCERT (2026-27) illustration and changed the figures. Do not ignore NCERT while practising numericals.
NCERT (2026-27 edition):
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