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Question
R, S and T were partners sharing profits and losses in the ratio of 5 : 3 : 2. On 31st March, 2021, their books reflected a net profit of ₹ 3,10,000. As per the terms of the partnership deed, they were entitled for interest on capital which amounted to ₹ 90,000, ₹ 60,000 and ₹ 30,000, respectively, for R, S and T. Besides this, an annual salary of ₹ 60,000 each was payable to R and S. The ratio in which the profits would be appropriated is ______.
Options
1 : 1 : 1
5 : 3 : 2
5 : 4 : 1
4 : 3 : 2
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Solution
R, S and T were partners sharing profits and losses in the ratio of 5 : 3 : 2. On 31st March, 2021, their books reflected a net profit of ₹ 3,10,000. As per the terms of the partnership deed, they were entitled for interest on capital which amounted to ₹ 90,000, ₹ 60,000 and ₹ 30,000, respectively, for R, S and T. Besides this, an annual salary of ₹ 60,000 each was payable to R and S. The ratio in which the profits would be appropriated is 5 : 3 : 2.
Explanation:
Calculate the total appropriation for each partner:
R: Interest on Capital + Salary
= ₹ 90,000 + ₹ 60,000
= ₹ 1,50,000
S: Interest on Capital + Salary
= ₹ 60,000 + ₹ 60,000
= ₹ 1,20,000
T: Interest on Capital = ₹ 30,000
Total appropriations = 1,50,000 + 1,20,000 + 30,000
= ₹ 3,00,000
Net Profit = ₹ 3,10,000
Since total appropriations (₹ 3,00,000) are less than the net profit (₹ 3,10,000), full appropriations will be allowed and the remaining profit will be distributed in the profit-sharing ratio.
