You visited us 1 times! Enjoying our articles? Unlock Full Access!

Application of Simple Interest in Real Life Situations

Ram and Mohan...

Question

Ram and Mohan are partners in a business. Their capitals at the end of the year were Rs. 24,000 and Rs. 18,000 respectively. During the year, Ram's drawings and Mohan's drawings were Rs. 4,000 and Rs. 6,000 respectively. Profit (before charging interest on capital) during the year was Rs. 16,000. Calculate interest on capital @ 5% p.a. for the year ended 31st March, 2018.

Open in App

Solution

Calculation of Capital balance in the beginning:

Particulars Ram Mohan
Capitals at the end of the year 24000 18000
Less: Profit already credited (8000) (8000)
Add: Drawings already debited 4000 6000
Capital at the beginning of the year 20000 16000
Note: Interest on capital is always calculated on the opening balance of the partner's capital.

Ram's interest on capital= 20000 * 5/100
= 1000
Mohan's interest on capital= 16000 * 5/100
= 800

Suggest Corrections

Similar questions

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.

Q. Bhanu and Partap are partners sharings profits equally. Their fixed capitals as on 1st April, 2017 are

R s . 8, 00, 000

and

R s . 10, 00, 000

respectively. Their drawings during the year were

R s . 50, 000

and

R s . 1, 00, 000

respectively. Interest on Capital is a charge and is to be allowed @ 10% p.a. and interest on drawings is be charged @ 15% p.a. Profit for the year ended 31st March, 2018 was

R s . 1, 20, 000

.
Prepare Profit and Loss Appropriation Account.

Mohan, Vijay and Anil are partners, the balance on their capital accounts being Rs 30,000, Rs 25,000 and Rs 20,000 respectively. In arriving at these figures, the profits for the year ended March 31, 2007 amounting to Rs 24,000 had been credited to partners in the proportion in which they shared profits. During the year their drawings for Mohan, Vijay and Anil were Rs 5,000, Rs 4,000 and Rs 3,000 respectively. Subsequently, the following omissions were noticed

(a) Interest on Capital, at the rate of 10% pa, was not charged.

(b) Interest on Drawings Mohan Rs 250, Vijay Rs 200, Anil Rs 150 was not recorded in the books.

Record necessary corrections through journal entries.

A

and

B

are partners in a business and their capitals at the end of the year were

R s . 7, 00, 000

and

R s 6, 00, 000

respectively. Calculate their opening capitals considering the following information:
(a) Drawings of

A

and

B

for the year were

R s . 75, 000

and

R s . 50, 000

respectively.
(b)

B

introduced capital of

R s .1, 00, 000

during the year.
(c) Interest on capital credited to the Capital Accounts of

A

and

B

were

R s .15, 000

and

R s . 10, 000

respectively.
(d) Interest on drawings debited to the Capital Accounts of

A

and

B

were

R s .7, 500

and

R s . 5, 000

respectively.
(e) Share of profit credited to Capital Accounts was

R s . 1, 00, 000

each.

Q. Mohan, Vijay and Anil are partners, the balances of their Capital Accounts being Rs. 30,000, Rs. 25,000 and Rs.20,000 respectively. In arriving at these figures, the profits for the year ended 31st March, 2016, Rs. 24,000 had already been credited to partners in the proportion in which they shared profits. Their drawings were Rs. 5,000 (Mohan), Rs. 4,000 (Vijay) and Rs. 3,000 (Anil) during the year. Subsequently, the following omissions were noticed and it was decided to bring them into account: (a) Interest on capital @ 10% pa. (b) interest on drawings: Mohan Rs. 250, Vijay, Rs. 200 and Anil Rs. 150. Make necessary corrections through a Journal entry and show your workings clearly.

Join BYJU'S Learning Program

Particulars	Ram	Mohan
Capitals at the end of the year	24000	18000
Less: Profit already credited	(8000)	(8000)
Add: Drawings already debited	4000	6000
Capital at the beginning of the year	20000	16000