Dairo and Segun are in partnership sharing profits and losses in the ratio 2:3 respectively. The information below relates to their business for the…

JAMB Accounting 2023 61 views

Dairo and Segun are in partnership sharing profits and losses in the ratio 2:3 respectively. The information below relates to their business for the year ended 31st December, 2018.

Drawings: ₦
Dairo 12000
Segun 18000
Capital:
Dairo 120000
Segun 60000

– Interest on drawings 10%
– Interest on capital 5%
– Profit for the year ₦36,000
– Salary: Segun ₦10,000
Segun’s share of profit is

Dairo and Segun are in partnership sharing profits and losses in the ratio 2:3 respectively. The information below relates to their business for the year ended 31st December, 2018.

Drawings: ₦
Dairo 12000
Segun 18000
Capital:
Dairo 120000
Segun 60000

– Interest on drawings 10%
– Interest on capital 5%
– Profit for the year ₦36,000
– Salary: Segun ₦10,000

The interest on Dairo’s drawings is

  1. ₦1,800
  2. ₦1,600
  3. ₦1,400
  4. ₦1,200 ✓

Explanation

Interest on drawings = Drawings × Interest rate. Dairo’s drawings = ₦12,000. Interest rate = 10%. Calculate: ₦12,000 × 10% = ₦1,200.

Interest on drawings penalizes partners for taking money out. This reduces their share of profits. It’s charged to discourage excessive withdrawals from the business.

Formula: Drawings amount × 10% = Interest charged on drawings.

pastquestions.ng