A and B are partners having capital of Rs. 50,000 and Rs. 60,000 respectively. Interest on capital is given @ 5% p.a. Profits for the year before appropriation is Rs. 4,600 provide interest on capital out of profits. Increase allocated to partners is :
  • a)
    Rs. 3,000 and Rs. 2,500
  • b)
    Rs. 2,090 and Rs. 2,509
  • c)
    Rs. 2,500 and Rs. 2,091
  • d)
    Rs. 600 and Rs. 300
Correct answer is option 'B'. Can you explain this answer?

CA Foundation Question

4 Answers
Priyanshu Tiwari answered Jan 14, 2020
Interest on capital =2500 And 3000
but profit = 4600
so 2500/ 3000= 5:6
amount is divided into 5: 6
A= 4600÷11×5=2091
B=4600÷11×6=2509

Khushboo Agarwal answered Aug 17, 2018
Interest on capital is capital*rate of interest which is 2500&3000. But this is greater than the existing profit. Hence the existing profit is distributed in the ratio of interest on capital

Nishu Jain answered 2 weeks ago
Interest on capital of A & B is 2500 & 3000 respectively .
so total interest on Capital is greater than profit . that's why interest on capital is not given to A & B and the profit is divided in their capital ratio ( 5 :6 ) becaz profit ratio is not given .
A's profit is 4600*5 / 11 =2090
B's profit is 4600*6 / 11 = 2509
then option B is correct

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