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Accountancy · 2025 · 3 marks
CBSE 2025 · Region 5 · Set 1 · Q17
Suman and Lata were partners in a firm sharing profits and losses in the ratio of 3: 2. On 1st April, 2023, their capital accounts showed balances of…
Suman and Lata were partners in a firm sharing profits and losses in the ratio of $\displaystyle 3$ : 2. On 1st April, $\displaystyle 2023$, their capital accounts showed balances of ₹ $\displaystyle 1{,}50{,}000$ and ₹ $\displaystyle 2{,}00{,}000$, respectively. The partnership deed provided for interest on capital @ $\displaystyle 8$% p.a. Show the treatment of interest on capital in the following cases if : (i) The firm earned a profit of ₹ $\displaystyle 14{,}000$ for the year ended 31st March , 2024. (ii) The firm earned a profit of ₹ $\displaystyle 60{,}000$ for the year ended 31st March , 2024.
Marking-scheme solution
(i)
Dr. Profit & Loss Appropriation A/c Cr.
for the year ended 31st March, $\displaystyle 2024$
Particulars Amount Particulars Amount
₹ ₹
Interest on Capital: P & L A/c (Net Profit) $\displaystyle 14{,}000$
Suman $\displaystyle 6{,}000$
Lata $\displaystyle 8{,}000$ $\displaystyle 14{,}000$
$\displaystyle 14{,}000$ $\displaystyle 14{,}000$
(ii)
Dr. Profit & Loss Appropriation A/c Cr.
for the year ended 31st March, $\displaystyle 2024$
Particulars Amount Particulars Amount
₹ ₹
Interest on Capital: P & L A/c (Net Profit) $\displaystyle 60{,}000$
Suman $\displaystyle 12{,}000$
Lata $\displaystyle 16{,}000$ $\displaystyle 28{,}000$
Profit transferred to capital accounts:
Suman $\displaystyle 19{,}200$
Lata $\displaystyle 12{,}800$ $\displaystyle 32{,}000$
$\displaystyle 60{,}000$ $\displaystyle 60{,}000$
Alternatively,
(i)
As the profit for the year is ₹$\displaystyle 14{,}000$, which is less than the amount of interest on capital due
to partners, i.e. ₹$\displaystyle 28{,}000$ (₹$\displaystyle 12000$+₹$\displaystyle 16000$), therefore, interest will be paid to the extent of
available profits i.e. ₹$\displaystyle 14{,}000$ in the ratio of interest on capital ($\displaystyle 3$:$\displaystyle 4$).
Suman’s interest on capital= 14000x $\displaystyle 3$/$\displaystyle 7$= ₹ $\displaystyle 6{,}000$
Lata’s interest on capital= 14000x $\displaystyle 4$/$\displaystyle 7$= ₹$\displaystyle 8{,}000$
(ii)
As the profit for the year is ₹$\displaystyle 60{,}000$, which is sufficient to pay the amount of interest on
capital due to partners, therefore, Full interest will be paid.
Suman’s interest on capital= ₹ $\displaystyle 12{,}000$
Lata’s interest on capital= ₹$\displaystyle 16{,}000$
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