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CMA Foundation · Fundamentals of Financial and Cost Accounting · Four Frameworks of Accounting and Forms of Organization

Anita and Kiran are partners in a firm sharing profits equally. Their capitals are ₹4,00,000 each. The partnership deed provides for interest on capital at 10% per annum and a salary of ₹60,000 per annum to Kiran. The firm's net profit before these items is ₹2,60,000. What is the amount credited to Anita's account in total for the year (interest plus profit share)?

Anita receives ₹1,00,000 in total. Interest on capital of ₹40,000 each and Kiran's salary of ₹60,000 are appropriated first, leaving ₹1,20,000 to be shared equally at ₹60,000 each. Anita's total is ₹40,000 interest plus ₹60,000 profit share.

  1. A₹1,00,000Correct
  2. B₹80,000
  3. C₹40,000
  4. D₹1,30,000

Explanation

Interest on capital: Anita ₹40,000, Kiran ₹40,000, total ₹80,000. Kiran's salary is ₹60,000. Profit left to share = 2,60,000 - 80,000 - 60,000 = ₹1,20,000, so each gets ₹60,000. Anita receives 40,000 + 60,000 = ₹1,00,000. Ignoring interest gives a wrong share of ₹60,000 only.

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