Question

Akbar and Birbal are partners in a firm sharing profits and losses in the ratio of 2 : 3. The following was the balance sheet of the firm as on 31st March, 2021.


Additional information:
The profit of ₹30,000 for the year ended 31st March, 2021 was divided between the partners without allowing interest on capital at 10% p.a. and salary to Akbar at ₹3,000 per quarter. During the year Akabr withdrew ₹10,000 and Birbal ₹20,000.

Calculate interest on capital for Akbar and Birbal:

[2 marks]

• A. Akbar - ₹5,800; Birbal - ₹2,200
• B. Akbar - ₹6,000; Birbal - ₹2,000
• C. Akbar - ₹4,800; Birbal - ₹200
• D. Akbar - ₹7,000; Birbal - ₹4,000

Answer 1

The correct option is A Akbar - ₹5,800; Birbal - ₹2,200

Interest on capital is calculated on opening capital.

Interest on Capital = Opening Capital x Rate
A = ₹58,000 $\times \frac{10}{100}$ = ₹5,800

B = ₹22,000 $\times \frac{10}{100}$ = ₹2,200