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The deed allows interest on capital at twelve percent but profit available for appropriation is lower. What is the correct treatment of interest on capital?

Answer and explanation

Correct answer: It will be allowed proportionately up to available profit

Interest on capital is an appropriation and cannot exceed available profit. If profit is low it is allowed proportionately.

Related tags

Interest On CapitalInsufficient ProfitPartnership DeedPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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