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Question

From the following Balance Sheet of Long and Short, calculate interest on capital @ 8% p.a. for the year ended 31st March, 2019.
BALANCE SHEET
as at 31st March, 2019
Liabilities Assets
Long's Capital A/c 1,20,000 Fixed Assets 3,00,000
Short's Capital A/c 1,40,000 Other Assets 60,000
General Reserve 1,00,000
3,60,000 3,60,000

During the year, Long withdrew ₹ 40,000 and Short withdrew ₹ 50,000. Profit for the year was ₹ 1,50,000 out of which ₹ 1,00,000 was transferred to General Reserve.

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Solution

Calculation of Capital at the beginning (as on April 01, 2018)

Particulars

Long
(₹)

Short
(₹)

Capital at the end

1,60,000

1,40,000

Less: Adjusted Profit (1,50,000 – 1,00,000) in 1:1 ratio

(25,000)

(25,000)

Add: Adjusted Drawings

-

50,000

Capital in the beginning

1,35,000

1,65,000


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