Abhay and Alok are partners sharing profits and losses in the ratio of 3 : 2. Their capital accounts showed balances of Rs. 1,50,000 and Rs. 2,00,000 respectively on April 01, 2024. Partnership deed provides for interest on capital @ 8% p.a. and the firm earned a profit of Rs. 14,000 during the financial year 2024-2025. What will be interest on capital of Alok for the year ending March 31, 2025?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs. 8,000
Interest on capital is an appropriation of profit, so it can be allowed only out of profit. When the profit is less than the interest due, the whole profit is shared in the ratio of interest on capital and no more is paid.
Interest due to Abhay = Rs. 1,50,000 × 8% = Rs. 12,000
Interest due to Alok = Rs. 2,00,000 × 8% = Rs. 16,000
Total interest due = Rs. 28,000, but profit = Rs. 14,000
Ratio of interest = 12,000 : 16,000 = 3 : 4
Alok's interest = Rs. 14,000 × 4/7 = Rs. 8,000
Rs. 16,000 is the interest Alok would get if the profit were enough. With a profit of only Rs. 14,000, the firm cannot pay the full amount.
Note: This question is from NCERT (2026-27). NTA sets numerical questions from NCERT too, so do not ignore NCERT while practising numericals.
NCERT (2026-27 edition):
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