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A and B share profits in the ratio of 2:1. Interest on A’s drawings is ₹9,000 and on B’s drawings is ₹3,000. By how much will the firm’s total profit increase before profit distribution?

Answer and explanation

Correct answer: ₹12,000

Interest on drawings is income for the firm, so it increases the profit available for appropriation. Total increase = ₹9,000 + ₹3,000 = ₹12,000. The 2:1 ratio affects only the distribution of profit, not the total increase. Exam tip: Add the interest on drawings of all partners; do not apply the profit-sharing ratio to calculate this increase.

Related tags

Partnership AccountsInterest On DrawingsProfit AppropriationAccounting AdjustmentsAdjustmentsPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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