Question

Krish and Tarun are partners in a firm with capitals of ₹ 40,000 and ₹ 60,000. As per their partnership deed:

1. Interest on capital is to be allowed to them @ 5% per annum.
2. Profits are to be shared in the ratio of 3 : 2.

The trading profits for the year 2023-24 was ₹ 3,600.

You are required to calculate the interest on capital allowed to the partners in the year 2023-24.

Answer 1

Given: Profit = ₹ 3,600

Krish’s capital ratio = `(₹ 40,000)/(₹ 1,00,000)` = 40%

Tarun’s capital ratio = `(₹ 60,000)/(₹ 1,00,000)` = 60%

We know,

Interest = Profit × Capital Ratio

Krish’s Share of Profit: 

Interest = `3,600 xx 40/100`

∴ Krish’s Share of Profit = ₹ 1,440 

Tarun’s Share of Profit: 

Interest = `3,600 xx 60/100`

∴ Tarun’s Share of Profit = ₹ 2,160