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If A's average capital is Rs 120,000 and B's average capital is Rs 80,000 and the interest on capital is 5% per annum, what is the total annual interest for both?

Answer and explanation

Correct answer: Rs 10000

Total average capital = Rs 120,000 + Rs 80,000 = Rs 200,000. Interest = 5% of Rs 200,000 = (5/100)×200,000 = Rs 10,000, so option A is correct. Option B (Rs 12,000) might result from applying a wrong rate (e.g. 6%) or miscalculating one partner's interest separately; that is incorrect. Exam tip: add the partners' average capitals first, then multiply by rate/100 (or convert 5% to 0.05) to avoid calculation errors.

Related tags

Average CapitalInterest On CapitalPartnership AccountsCapital InterestCapital AccountsPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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