How to calculate interest on loan

Example: Anik and Manik started a partnership business on April 01, 2011. Their capital contribution were Rs 1,40,000 and Rs 1,05,000 respectively. Their partnership deed provides for the following.

a. Interest on capital @ 10%.
b. Salary to Anik Rs 1,400 per month and to Manik Rs 2,100 per month.
c. Amount of loan advanced by Anik to the firm Rs 1,00,000
d. Rent paid to Manik amounts to Rs 12,590.
e. Profit sharing ratio is 3 : 2.

The profit for the year ended March 31, 2012 before considering above appropriations were Rs 1,51 ,200. Interest on drawings made by the partners amounted to Rs 1,340 for Anik and Rs 1,750 for Manik. Show the distribution of profits between the partners.

Dear Student

In case the rate of Interest on loan is missing in partnership deed, then Interest on loan given by partner to the firm is provided at 6% p.a.

Therefore here Interest on loan given by Anik to he firm is 1,00,000 x 6% = 6,000/-.

It has been assumed that loan was provided in the beginning of the year and hence interest is calculated for the whole year.


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