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If A and B share profits equally but interest on capital is allowed in capital ratio then on what basis will interest be credited in capital accounts?

Answer and explanation

Correct answer: On the basis of capital amounts

Interest on capital is calculated on capital and not on profit ratio. Profit ratio is for sharing remaining profit.

Related tags

Interest On CapitalCapital RatioProfit RatioCapital AccountsPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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