Shortcut Trick
Total Capital = 50,000 + 70,000 = 1,20,000.
Total Interest to be paid = 10% of 1,20,000 = ₹12,000.
Remaining profit to be shared = 18,000 − 12,000 = ₹6,000.
Capital ratio A : B = 5 : 7 → A's profit share = (5 ÷ 12) × 6,000 = ₹2,500.
A's total share = Interest (5,000) + Profit (2,500) = ₹7,500.
∴ The correct answer is ₹7,500.
Alternate Method
Given:
A's Capital = ₹50,000
B's Capital = ₹70,000
Total Profit including interest = ₹18,000
Interest rate = 10% per annum on capital
Formula Used:
Profit Ratio = Ratio of Investment × Time
Simple Interest = (Principal × Rate × Time) ÷ 100
₹5000
₹2500
Total = ₹7500
A
₹7000
₹3500
Total = ₹10500
B
10% Interest
Profit Share
Calculations:
⇒ Interest on A's capital = 10% of 50,000 = ₹5,000
⇒ Interest on B's capital = 10% of 70,000 = ₹7,000
⇒ Total interest distributed = 5,000 + 7,000 = ₹12,000
⇒ Remaining profit = Total Profit − Total Interest
⇒ Remaining profit = 18,000 − 12,000 = ₹6,000
⇒ Ratio of investments (A : B) = 50,000 : 70,000 = 5 : 7
⇒ Sum of ratio parts = 5 + 7 = 12 parts
⇒ A's share in remaining profit = (5 ÷ 12) × 6,000 = 5 × 500 = ₹2,500
⇒ A's total share = Interest on A's capital + A's share in remaining profit
⇒ A's total share = 5,000 + 2,500 = ₹7,500
∴ The correct answer is ₹7,500.
Additional Information
Simple vs Compound Partnership
In a simple partnership, capitals are invested for the same time period and profit is distributed based on the capital ratio alone. In a compound partnership, time periods differ, and profit is shared in the ratio of (Capital × Time).
Working vs Sleeping Partner
A working partner actively manages the business and receives a fixed salary or a certain percentage of the profit before the remaining profit is distributed. A sleeping partner only invests capital and receives a share of the residual profit.
Interest on Capital
When a partnership deed specifies interest on capital, it must be paid out of the total profit first. The remaining residual profit is then distributed among the partners in their agreed profit-sharing ratio.