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Net profit is fifty thousand rupees. Deed provides interest on capital of sixty thousand rupees and clearly says it is payable irrespective of profit or loss. What is the correct effect?

Answer and explanation

Correct answer: Loss of ten thousand rupees will arise

Such clause makes interest on capital a charge against profit. Deducting sixty thousand from fifty thousand profit creates loss of ten thousand.

Related tags

Interest On CapitalChargeLossProfit DistributionPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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