Definitions [1]
Definition : Depreciation
Depreciation means a gradual decrease in the value of fixed assets like buildings, machinery, furniture, and equipment due to their use, passage of time, or technological changes.
Key Points
Provisions Relating to Interest on Capital
- No Agreement Mentioned: If the partnership deed is silent about interest on capital, no interest is allowed.
- Agreement Allows Interest (No Profit = No Interest): If interest is allowed but not stated as a charge or appropriation, interest is given only when there’s profit.
- Case of Loss: If the firm faces a loss, then no interest on capital is given, even if the deed allows it.
- Profit ≥ Interest: If the profit is equal to or more than the interest, then full interest is given.
- Profit < Interest: If the profit is less than the interest, then interest is limited to the profit, and it is shared in proportion to the partners’ interest in capital.
Format: Calculation of Interest on Capital
Calculation of Interest on Capital
| Particulars | ₹ |
|---|---|
| Interest on Opening Capital (Opening Capital × Rate of Interest / 100 × 12 / 12) |
... |
| Add: Interest on Additional Capital introduced during the year [Additional Capital × Rate of Interest / 100 × Period (from the date of introduction to the end of accounting year) / 12] |
... |
| Less: Interest on Capital Withdrawn [Capital withdrawn × Rate of Interest / 100 × Period (from the date of withdrawal to the end of accounting period) / 12] |
... |
| Total Interest on Capital | ... |
Important Questions [5]
- Under Single Entry System, Additional Capital Brought in During the Year is _____ Closing Capital in Order to Calculate Profit.
- Select the Most Appropriate Answer the Alternatives Given Below and Rewrite the Sentence
- The Interest on Drawings is Transferred to ___________ Side of the Profit and Loss Account.
- Mr. Yogesh Keeps His Books on Single Entry System. from the Following Particulars, Prepare Opening and Closing Statement of Affairs and Statement of Profit and Loss.
- Mr. Balasaheb is Dealing in the Business of Fruits. He Maintains His Accounting Record with Single Entry. the Following Figures Are Taken from His Record.
Concepts [10]
- Concept of Single Entry System
- Statements of Affairs
- Additional Information - Additional Capital
- Effects of Adjustments-Drawings
- Concept of Depreciation
- Additional Information - Undervaluation of Assets and Liabilities
- Additional Information - Overvaluation of Assets and Liabilities
- Interest on Capital and Current Accounts
- Additional Information - Partners Salary
- Illustrations of Single Entry System
