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The deed says interest on capital will be allowed only when profit is available. Profit is thirty four thousand rupees and total interest on capital is fifty one thousand rupees. What is the correct treatment?

Answer and explanation

Correct answer: Interest will be allowed proportionately up to thirty four thousand

Interest on capital is an appropriation limited to available profit. If profit is lower interest is allowed proportionately up to thirty four thousand.

Related tags

Interest On CapitalInsufficient ProfitAppropriationProfit DistributionPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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