Question

Rahul, Rohit and Karan started partnership business on April 1, 2006 with capitals of Rs. 20,00,000, Rs. 18,00,000 and Rs. 16,00,000, respectively. The profit for the year ended March 2007 amounted to Rs.1,35,000 and the partner’s drawings had been Rahul Rs. 50,000, Rohit Rs. 50,000 and Karan Rs. 40,000. The profits are distributed among partner’s in the ratio of 3:2:1. Calculate the interest on capital @ 5% p.a

Answer 1

Note: The total interest on capital of these partners is more than profit for the year. if interest on capital was to be charged out of profit then it would have been given proportionately.