A and B started business on 1st April, 2017 with capitals of Rs. 15,00,000 and Rs. 9,00,000 respectively. On 1st October, 2017, they decided that their capitals should be Rs. 12,00,000 each. The necessary adjustments in capitals were made by introducing or withdrawing by cheque. Interest on capital is allowed@ 8% p.a. Compute interest on capital for the year ended 31st March, 2018.

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Solution

1. Calculation of interest on A's capital:

Time before changing the capital= 6 months
Capital= 1500000
Total capital= 15000006
= 9000000
Time after changing the capital= 6 months
Capital= 1200000
Total Capital= 12000006
= 7200000
Hence, Total capital of A= 9000000+7200000
= 16200000
Interest on capital= 16200000 * 8/100 * 1/12
= 108000

2. Calculation of interest on B's Capital:

Time before changing the capital= 6 months
Capital= 900000
Total capital= 9000006
= 5400000
Time after changing the capital= 6 months
Capital= 1200000
Total Capital= 12000006
= 7200000
Hence, Total capital of B= 5400000+7200000
= 12600000
Interest on capital= 12600000 * 8/100 * 1/12
= 84000

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