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Appropriation of Profits

On March 31, ...

Question

On March 31, 2017 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% p.a. 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.

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Solution

Generally interest on Capital is calculated on opening balance of capital. If additional capital is not given.

Mountain

Hill

Rock

Closing Capital

4,00,000

3,00,000

2,00,000

Add: Drawings

20,000

15,000

10,000

Less: Profit (1:1:1)

(50,000)

(50,000)

(50,000)

Opening Capital

3,70,000

2,65,000

1,60,000

Interest on Capital

Mountain

3,70,000 ×= Rs 37,000

Hill

2,65,000 × = Rs 26,500

Rock

1,60,000 × = Rs 16,000

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On 31st March 2018 after closing the books of account, their Capital Accounts stood at Rs. 4,80,000 and Rs. 6,00,000 respectively .

On 1st May, 2017,

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introduced an additional capital of Rs. 1,20,000 and Y withdrew Rs. 60,000 from his capital. On 1st October, 2017, X withdrew Rs. 2,40,000 from his capital and Y introduced Rs. 3,00,000. Interest on capital is allowed at 6% p.a. Subsequently, it was discovered that interest on capital @ 6% p.a. had been omitted. The profits for the year ended 31st March, 2018 amounted to Rs. 2,40,000 and the partners drawings had been: X- R. 1,20,000 and Y - Rs. 60,000. Compute the interest on capital if the capitals are
(a) fixed, and (b) fluctuating.

X

and

Y

are partners sharing profits in the ratio of

3 : 2

. On 31st March, 2017 after closing the books of account, their capitals are

R s . 10, 00, 000

and

R s . 12, 50, 000

respectively. On 1st May, 2016,

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had introduced an additional capital of

R s . 2, 50, 000

and

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withdrew

R s . 1, 25, 000

from his capital. On 1st October, 2016,

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withdrew

R s . 5, 00, 000

from his capital and

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R s . 6, 25, 000

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6 %

p.a. has been omitted. During the year ended 31st March, 2017,

X^{'} s

drawings and

Y^{'} s

drawings were

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and

R s . 1, 25, 000

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R s . 5, 00, 000

.
Calculate Interest on Capital if the capitals are (a) fixed and (b) fluctuating.

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	Mountain	Hill	Rock
Closing Capital	4,00,000	3,00,000	2,00,000
Add: Drawings	20,000	15,000	10,000
Less: Profit (1:1:1)	(50,000)	(50,000)	(50,000)
Opening Capital	3,70,000	2,65,000	1,60,000

Mountain	3,70,000 ×= Rs 37,000
Hill	2,65,000 × = Rs 26,500
Rock	1,60,000 × = Rs 16,000