Question

Girish and Satish are partners in a firm. Their capitals on April 1, 2023, were ₹ 5,60,000 and ₹ 4,75,000, respectively. On August 1, 2023, they decided that their capitals should be ₹ 5,00,000 each. The necessary adjustments in the capitals were made by introducing or withdrawing cash. Interest on capital is allowed at 6% p.a. You are required to compute interest on capital for the year ending March 31, 2024.

Answer 1

Girish’s interest (6% p.a):

April 1, 2023, to August 1, 2023 = 4 Months

Interest on capital = `5,60,000 xx 6/100 xx 4/12`

= 11,200

August 1, 2023, to March 31, 2024 = 8 Months

Interest on capital = `5,00,000 xx 6/100 xx 8/12`

= 20,000

Total interest = 11,200 + 20,000

= 31,200

Satish’s interest (6% p.a):

April 1, 2023, to August 1, 2023 = 4 Months

Interest on capital = `4,75,000 xx 6/100 xx 4/12`

= 9,500

August 1, 2023, to March 31, 2024 = 8 Months

Interest on capital = `5,00,000 xx 6/100 xx 8/12`

= 20,000

Total interest = 9,500 + 20,000

= 29,500