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Question -

On March 31, 2017 after the close of accounts, the capitals of Mountain, Hill and Rock stood in the books of the firm at ₹ 4, 00,000, ₹ 3, 00,000 and ₹ 2, 00,000, respectively. Subsequently, it was discovered that the interest on capital @ 10% p.a. had been omitted. The profit for the year amounted to ₹ 1, 50,000 and the partner’s drawings had been Mountain: ₹ 20,000, Hill ₹ 15,000 and Rock ₹ 10,000. Calculate interest on capital.



Answer -

Generally interest on Capital is calculated on opening balance of capital. If additional capital is not given.

 

Mountain

Hill

Rock

Closing Capital

4,00,000

3,00,000

2,00,000

Add: Drawings

20,000

15,000

10,000

Less: Profit (1:1:1)

(50,000)

(50,000)

(50,000)

Opening Capital

3,70,000

2,65,000

1,60,000

 

Intereston Capital

Mountain

3,70,000 ×10 / 100= ₹ 37,000

Hill

2,65,000 × 10 / 100= ₹ 26,500

Rock

1,60,000 × 10 / 100= ₹ 16,000

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