Question

X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2 with capitals of ₹ 10,00,000 and ₹ 5,00,000, respectively. As per the partnership deed, they are to be allowed interest on capital @ 8% p.a. The net profit for the year ended 31st March, 2024, before providing for interest on capital, amounted to ₹ 45,000. Show the distribution of profit.

Answer 1

Interest on capital:

X’s capital = `10,00,000 xx 8/100`

= 80,000

Y’s capital = `5,00,000 xx 8/100`

= 40,000

Total interest = ₹ 80,000 + ₹ 40,000

= ₹ 1,20,000

Net profit before interest on capital = ₹45,000

Distribute the Available Profit:

X’s share of the profit = `45,000 xx 3/5`

= 27,000

Y’s share of the profit = `45,000xx 2/5`

= 18,000