Question

Sara and Tara were partners in a firm. Their capitals as on 1st April, 2023 were ₹ 6,00,000 and ₹ 4,00,000 respectively. On 1st October, 2023, Tara withdrew ₹ 1,00,000 for personal use. According to the partnership deed, interest on capital was allowed @ 8% p.a.
The amount of interest allowed on Tara’s capital for the year ended 31st March, 2024 was :

• A. ₹ 28,000
• B. ₹ 30,000
• C. ₹ 48,000
• D. ₹ 32,000

Hint:

When capital changes mid-year (due to drawings or additional capital), always split the interest calculation into separate periods.

Answer 1

The Correct Option is D

Phase 1: Interest Calculation on Initial Capital (6 Months).
Tara's initial capital: ₹ 4,00,000
Withdrawal date: October 1, 2023
For the initial 6-month period (April to September), interest is computed on the full ₹ 4,00,000:
\[\text{Interest} = \frac{4,00,000 \times 8 \times 6}{100 \times 12} = ₹ 16,000\]Phase 2: Interest Calculation on Remaining Capital (Next 6 Months).
Following a withdrawal of ₹ 1,00,000, the remaining capital is ₹ 3,00,000.
For the subsequent 6-month period (October to March):\[\text{Interest} = \frac{3,00,000 \times 8 \times 6}{100 \times 12} = ₹ 12,000\]Total Interest on Capital:
\[\text{Total Interest} = ₹ 16,000 + ₹ 12,000 = ₹ 28,000\]Note: The verified correct answer is ₹ 28,000, indicating a potential error in the initially marked answer (4) of ₹ 32,000. Correct Answer (Verified): (1) ₹ 28,000