Question

Ridhima and Kavita were partners sharing profits and losses in the ratio of 3 : 2. Their fixed capitals were Rs.1,50,000 and Rs.2,00,000 respectively. The partnership deed provides for interest on capital @ 8% p.a. The net profit of the firm for the year ended 31^st March, 2023 amounted to Rs.21,000.
The amount of interest on capital credited to the capital accounts of Ridhima and Kavita will be:

• A. Rs.12,000 and Rs.16,000 respectively.
• B. Rs.10,500 and Rs.10,500 respectively.
• C. Rs.9,000 and Rs.12,000 respectively.
• D. Rs.16,000 and Rs.5,000 respectively.

Hint:

When net profit is insufficient to meet interest on capital, allocate it in the proportion of the partners’ entitlement.

Answer 1

The Correct Option is C

The partnership deed provides for interest on capital at 8\% p.a., and the partners' fixed capitals are as follows: \[ {Ridhima's Capital: } Rs.1,50,000, \quad {Kavita's Capital: } Rs.2,00,000. \] Step 1: Calculate the total interest on capital entitlement:
\[ {Ridhima's Interest: } Rs.1,50,000 \times \frac{8}{100} = Rs.12,000. \] \[ {Kavita's Interest: } Rs.2,00,000 \times \frac{8}{100} = Rs.16,000. \] Total entitlement for interest on capital: \[ Rs.12,000 + Rs.16,000 = Rs.28,000. \] Step 2: Allocate available profit proportionately:
The total profit of the firm is Rs.21,000, which is insufficient to meet the total entitlement of Rs.28,000. The available profit is distributed in the ratio of the interest entitlement: \[ {Ratio of Interest Entitlement: } 12 : 16 = 3 : 4. \] \[ {Ridhima's Share: } Rs.21,000 \times \frac{3}{7} = Rs.9,000. \] \[ {Kavita's Share: } Rs.21,000 \times \frac{4}{7} = Rs.12,000. \] Conclusion:
The amount of interest on capital credited to Ridhima and Kavita's capital accounts is \( Rs.9,000 { and } Rs.12,000 \), respectively.