Question

On March 31, 2006 after the close of accounts, the capitals of Mountain, Hill and Rock stood in the books of the firm at Rs 4,00,000, Rs 3,00,000 and Rs 2,00,000 respectively. Subsequently, it was discovered that the interest on capital @ 10% pa had been omitted. The profit for the year amounted to Rs 1,50,000 and the partner's drawings had been Mountain; Rs 20,000, Hill Rs 15,000 and Rock Rs 10,000.

Calculate interest on capital.

Answer 1

Calculation of Opening Capital

$\begin{array}{cccc}\text{Particulars}& \text{Mountain}& \text{Hill}& \text{Rock}\\ \text{Closing Capital}& 4,00,000& 3,00,000& 2,00,000\\ \text{(+) Drawings}& 20,000& 15,000& 10,000\\ \text{(-) Profits}& (50,000)& (50,000)& (50,000)\\ \text{Opening Capital}& \underset{–}{\underset{–}{\overline{3,70,000}}}& \underset{–}{\underset{–}{\overline{2,65,000}}}& \underset{–}{\underset{–}{\overline{1,60,000}}}\end{array}$

Interest on Capital

Mountain $\Rightarrow 3,70,000\times \frac{10}{100}=Rs37,000$

Hill $\Rightarrow 2,65,000\times \frac{10}{100}=Rs26,500$

Rock $\Rightarrow 1,60,000\times \frac{10}{100}=Rs16,000$