Question

On March 31, 2003, after the close of books of accounts, the capital accounts of Ram, Shyam and Mohan showed balance of Rs 24,000, Rs 18,000 and Rs 12,000, respectively. It was later discovered that interest on capital @ 5% had been omitted. The profit for the year ended March 31, 2003, amounted to Rs 36,000 and the partner's drawings had been Ram, Rs 3,600; Shyam, Rs 4,500 and Mohan, Rs 2,700. The profit sharing ratio of Ram, Shyam and Mohan was 3 : 2 : 1. Calculate interest on capital.

Answer 1

Calculation of Opening Capital

$\begin{array}{cccc}\text{Particulars}& \text{Ram}& \text{Shyam}& \text{Mohan}\\ \text{Closing Capital}& 24,000& 18,000& 12,000\\ \text{(+) Drawings}& 3,600& \text{4,500}& 2,700\\ \text{(-) Profit (3:2:1)}& \text{(18,000)}& \text{(12,000)}& \text{(6,000)}\\ & \text{9,600}& \text{10,500}& \text{8,700}\end{array}$

Interest on Capital

Ram $\Rightarrow 9,600\times \frac{5}{100}=Rs480$

Shyam $\Rightarrow 10,500\times \frac{5}{100}=Rs525$

Mohan $\Rightarrow 8,700\times \frac{5}{100}=Rs435$