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The deed says reserve is created first and interest on capital is allowed afterwards. Profit is fifty thousand rupees reserve is twenty thousand and total interest on capital is forty thousand. How much is available for interest on capital?

Answer and explanation

Correct answer: Thirty thousand rupees

After deducting reserve first profit left is thirty thousand. Interest on capital as normal appropriation is allowed only up to available amount.

Related tags

Reserve PriorityInterest On CapitalInsufficient ProfitProfit DistributionPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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