Ahamad and Basheer contribute Rs. 60,000 and Rs. 40,000 respectively

1.	Ahamad and Basheer contribute Rs. 60,000 and Rs. 40,000 respectively as capital. Their respective share of profit is 2: 1 and the profit before interest on capital for the year are Rs. 5,000. Compute the amount of interest on capital in each of the following situations:1. If the partnership deed is silent as to the interest on capital 2. If interest on capital @ 4% is allowed as per the partnership deed 3. If the partnership deed allows interest on capital @ 6% per annum.
Answer» 1. No Interest on capital is allowed. 2. Since the profit is sufficient, Interest on capital will be provided. Ahamad: 60, 000 × 4/100 = Rs. 2, 400 Basheer: 40, 000 × 4/100 = Rs. 1, 600 3. Since the profit is insufficient, Interest on capital will be provided. Ahamad: 60, 000 × 6/100 = Rs. 3, 600 Basheer: 40, 000 × 6/100 = Rs. 2, 400 Profit of 5,000 will be distributed to the partners in their capital ratio of 3:2.

Ahamad and Basheer contribute Rs. 60,000 and Rs. 40,000 respectively as capital. Their respective share of profit is 2: 1 and the profit before interest on capital for the year are Rs. 5,000. Compute the amount of interest on capital in each of the following situations:1. If the partnership deed is silent as to the interest on capital 2. If interest on capital @ 4% is allowed as per the partnership deed 3. If the partnership deed allows interest on capital @ 6% per annum.

Answer»

1. No Interest on capital is allowed.

2. Since the profit is sufficient, Interest on capital will be provided.

Ahamad:

60, 000 × 4/100 = Rs. 2, 400

Basheer:

40, 000 × 4/100 = Rs. 1, 600

3. Since the profit is insufficient, Interest on capital will be provided.

Ahamad:

60, 000 × 6/100 = Rs. 3, 600

Basheer:

40, 000 × 6/100 = Rs. 2, 400

Profit of 5,000 will be distributed to the partners in their capital ratio of 3:2.