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Standard XII

Accountancy

Appropriation of Profits

On March 31, ...

Question

On March 31, 2017, 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, 2017, 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.

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Solution

Ram

Shyam

Mohan

Capital on March 31

24,000

18,000

12,000

Add: Drawings

3,600

4,500

2,700

Less: Profit (3:2:1)

(18,000)

(12,000)

(6,000)

Capital April 01, 2012

9,600

10,500

8,700

Here, Interest on Capital = Opening Capital ×

Ram’s = = Rs 480

Shyam’s = = Rs 525

Mohan’s = 8,700 × = Rs 435

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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,

X

had introduced an additional capital of

R s . 2, 50, 000

and

Y

withdrew

R s . 1, 25, 000

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X

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R s . 5, 00, 000

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Y

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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

R s . 2, 50, 000

and

R s . 1, 25, 000

. Profits (before interest on Capital) during the year were

R s . 5, 00, 000

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

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	Ram	Shyam	Mohan
Capital on March 31	24,000	18,000	12,000
Add: Drawings	3,600	4,500	2,700
Less: Profit (3:2:1)	(18,000)	(12,000)	(6,000)
Capital April 01, 2012	9,600	10,500	8,700