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The deed says reserve of thirty five thousand rupees must be created first and then interest on capital is allowed. Profit is one lakh rupees and total interest on capital is eighty thousand rupees. What amount is available for interest on capital?

Answer and explanation

Correct answer: Sixty five thousand rupees

Reserve is deducted first. After deducting thirty five thousand from one lakh only sixty five thousand is available for interest on capital.

Related tags

Reserve PriorityInterest On CapitalInsufficient ProfitProfit DistributionPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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