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A and B share profits in the ratio 5:4. A gave a loan of ₹60000 to the firm carrying 6% interest for the full year. What is the relation of this interest with profit ratio?

Answer and explanation

Correct answer: It is an expense independent of profit ratio

Interest on partner's loan is a firm's expense and is not shared in the profit ratio. It is payable before profit is determined.

Related tags

PartnershipPartner LoanConceptualAdjustmentsPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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