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Question

Following is the extract of the Balance Sheet of Neelkant and Mahadev as on 31st March, 2018.
LiabilitiesRs.AssetsRs.
Neelkant's Capital
Mahadev's Capital
Neelkan't Curent A/c
Mahadev's Current A/c
Profit and Loss Appropriation A/c (March 2018)
10,00,000
10,00,000
1,00,000
1,00,000
8,00,000
Sundry Assets

30,00,000

30,00,00030,00,000
During the year Mahadev's drawings were Rs. 30,000. profits during the year ended 31st march, 2018 is Rs. 10,00,000. calculate interest on capital @ 5% p.a. for the ending 31st march, 2018.

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Solution

Assuming that Mahadev's drawings are from his capital.
Calculation of Interest on Capital
Neelkant:- Interest on 10,00,000*5% = 50,000
Mahadev's:- Interest on( 10,00,000-30,000)
= 9,70,000*5%
= 48,500

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