Question

A and B are partners in a business. Their capitals at the end of the year were ₹ 6,40,000 and ₹ 4,60,000, respectively. During the year ending 31st March, 2022, A’s drawings and B’s drawings were ₹ 1,20,000 and ₹ 1,40,000, respectively. Profits (before charging interest on capital) during the year were ₹ 4,00,000. Calculate interest on capital @ 12% p.a. for the year ending 31st March, 2022.

Answer 1

A’s Opening Capital = A’s Closing Capital + A’s Drawing − A’s Share of profit

= `6,40,000 + 1,20,000 − 4,00,000 xx 1/2`

= 7,60,000 − 2,00,000

= 5,60,000

Interest on A’s Capital = `5,60,000 xx 12/100`

= 67,200

B’s Opening Capital = B’s Closing Capital + B’s Drawing − B’s Share of profit

= `4,60,000 + 1,40,000 − 4,00,000 xx 1/2`

= 6,00,000 − 2,00,000

= 4,00,000

Interest on B’s Capital = `4,00,000 xx 12/100`

= 48,000