Question

2. Which among the following is the correct justification for providing interest on Partner's Capital ?

A) Capital contribution is unequal but profit shares are equal
B) Capital contribution is equal but profit shares are unequal
C) Both A & B
D) None of the above​

Answer 1

c) both a and b

Thank you

Have a good day

Answer 2

The correct option is C) Both A & B

• In the case of the Capital method, generally two accounts are opened for recording the transactions, the capital and current account.
• Capital Account that documents capital introduction. If there is an influx of new capital and a reduction of capital, it remains set year after year.
• Thus, there are two conditions for providing interest on Partner's Capital which are -

1. When a partner puts in uneven amounts of money yet splits the gains.
2. When capital input is equal but profit sharing is uneven.