Question

Interest on capital will be provided to Aditi and Saurabh in which of the following ratio?

• A. 5:4
• B. 1:1
• C. 8:1
• D. 2:1

Hint:

Unless explicitly stated otherwise, always distribute interest on capital in proportion to the partners' capital balances.

Answer 1

The Correct Option is A

Interest on capital is distributed in proportion to the partners' capital contributions unless specified otherwise in the partnership agreement. Step 1: Aditi's capital and Saurabh's capital:
Aditi's capital = \rupee 5,00,000, Saurabh's capital = \rupee 4,00,000.
Step 2: Ratio of capitals:
\[ \text{Ratio of capitals} = \rupee 5,00,000 : \rupee 4,00,000 = 5:4. \] Step 3: Applying the proportional rule:
Since the partnership agreement does not specify a different ratio for interest on capital, it will be distributed in the ratio of their capitals, which is $5:4$. Conclusion:
The interest on capital will be distributed between Aditi and Saurabh in the ratio $5:4$.