Question

Anna and Bobby were partners sharing profits and losses in the ratio of 5 : 3. On 1st April, 2023, their capital accounts showed balances of ₹ 3,00,000 and ₹ 2,00,000, respectively. Calculate the amount of profit to be distributed between the partners if the partnership deed provided for interest on capital @ 10% p.a., and the firm earned a profit of ₹ 45,000 for the year ended 31st March, 2024.

Answer 1

Given: Profit for the year = ₹ 45,000

Interest on capital = 10% per annum

Anna’s capital = ₹ 3,00,000

Bobby’s capital = ₹ 2,00,000

Interest on capital:

Anna’s interest = `3,00,000 xx 10/100`

= 30,000

Bobby’s interest = `2,00,000 xx 10/100`

= 20,000

Total interest = 30,000 + 20,000

= 50,000

Since the profit is ₹ 45,000, which is not enough to cover the total interest of ₹ 50,000, it is distributed based on the ratio of interest on capital.

The ratio of interest on capital is 3 : 2.

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

= 27,000

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

= 18,000