Question

Aditi and Saurabh were partners in a firm sharing profits and losses in the ratio of 2 : 1. On 1^st April, 2022 their capitals were ₹ 5,00,000 and ₹ 4,00,000 respectively. Before any appropriation, the firm earned a Net profit of ₹ 81,000 for the year ended 31^st March, 2023. According to the partnership deed, interest on capital was to be provided @ 10% p.a.

Interest on capital will be provided to Aditi and Saurabh in which of the following ratio?

Options

• 5 : 4

• 2 : 1

• 1 : 1

• 8 : 1

Answer 1

5 : 4

Explanation:

Interest on capital is not paid when the business firm experiences a loss. Interest on capital will not be paid if there is insufficient profit, meaning that the net profit is less than the amount of interest on capital. Instead, the profit will be divided among the business firm's partners according to their capital ratio.