A and B are partners sharing profits and losses in the ratio of 2 : 1. A is a non-working partner and has contributed Rs. 12,00,000 as his capital. B is a working partner. The partnership deed provides for interest on capital @ 10% p.a. and salary of Rs.7,500 per month to the working partner. The net profit for the year ended 31st March, 2016 before providing for interest on capital and salary amounted to Rs.70,000. You are required to show the distribution of profit.
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Loss shared is
A = 93,334
B = 46,664
Explanation:
Definition of Interest on capital
Interest on capital is the interest paid to the owners for providing a firm with the required capital to establish a business. ... It is not different from obtaining a loan from any financial institution. The partners are entitled to interest on the capital that remains outstanding.
The salary is mentioned to be 7,500 per month so the total salary will be 7,500 x 12 = 90,000
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