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Interest on Capital Exceeds Profits

A and B are p...

Question

A and B are partners in a firm sharing profits in the ratio of 3 : 2. They had advanced to the firm a sum of ₹ 30,000 as a loan in their profit-sharing ratio on 1st October, 2017. The Partnership Deed is silent on interest on loans from partners. Compute interest payable by the firm to the partners, assuming the firm closes its books every year on 31st March.

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Solution

Amount advanced by the Partners = Rs 30,000

Profit sharing ratio = 3 : 2

Time Period (from October 01, 2017 to March 31, 2018) = 6 months

Interest rate = 6% p.a.

Calculation of Interest on Advances

Note: In the absence of a partnership agreement regarding rate of interest on loans and advances, interest is provided at 6% p.a.

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