Partners M and N have capital ₹80,000 and ₹120,000 respectively with a profit‑sharing ratio of 2:3. After three years, Partner O joins with a capital of ₹30,000 and will receive interest at 7% per annum for 4 months before admission. After admission the profit‑sharing ratio becomes M:N:O = 5:3:2. The partnership earns a profit of ₹90,000 during the year of admission. Find (i) the interest payable to O and (ii) O’s share of the profit.

Step-by-step solution

1. Compute interest for 4 months: $30,000\times 0.07\times \frac{4}{12}=700$ rupees.
2. Subtract interest from total profit: $90,000-700=89,300$ rupees available for profit sharing.
3. Total parts of new ratio = $5+3+2=10$. Calculate O’s share: $\frac{2}{10}\times 89,300=17,860$ rupees.
4. Answer: Interest ₹700, Profit share ₹17,860

Concept tested: Interest on capital before admission and profit distribution

Published 1 October 2026 · How this solution was prepared and checked