If the opening capital is 50,000 as on April 1, 2005 and additional capital introduced 10,000 on January 1, 2006. Interest charge on capital 10% pa. The amount of interest on capital shown in Profit and Loss account as on March 31, 2006 will be_________.

5,250

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6,000

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4,000

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3,000

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Solution

The correct option is C 5,250
A Computation of interest on capital
Interest on initial capital for whole year = 50,000 @ 10% for 12 months
= 5,000
Interest on additional capital introduce on January 1, 2006 interest will be charged for 3 months only = 250
Interest will be 10,000 @ 10% for 3 months Total interest will be 5,000+ 250 = 5,250

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