Multiple choice

A partnership deed allows 10% p.a. interest on capital to the partners. A will get Rs. 12,000 and B will get Rs. 8,000. It was found that A could get only Rs. 7,200 and B could get only Rs. 4,800. What is the reason behind that?

  1. Because capital is fixed.

  2. Because capital is fluctuating.

  3. Some part of profit is kept as reserve.

  4. Appropriations are more than the profit.

  5. There was loss last year.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Yes, it is correct. When interest on capital is treated as an appropriation, in such a case partners can get appropriations only up to the profit. In this case profit is less and appropriations are more, or we can say that profit is insufficient.

Keep practicing — related questions