Question 35 Chapter 2 of +2-A
Calculation of Interest on Partner’s Drawings: -
35. A and B are partners sharing Profit and Loss in the ratio 3: 2 having Capital Account balances of 50,000 and 40,000 on 1st April 2018. On 1st July 2018, A introduced 10,000 as his additional capital whereas B introduced only 1,000. Interest on capital is allowed to partners @ 10% p.a.
Calculate interest on capital for the financial year ended 31st March 2019.
Calculation of Interest on A’s Capital by Product Method
We will do it with the product method because of Kanika withdrawal a different amount every time.
|
Period |
Amount of A’s Capital (A) |
Period Left after (B) |
Product (C=A*B) |
|---|---|---|---|
| April 01, 2018, to June 30, 2018 | 50,000 | 3 | 1,50,000 |
| July 01, 2018, to March 31, 2019 | 60,000 | 9 | 5,40,000 |
| Sum of Product | 6,90,000 |
Interest on Capital = Sum of Product X Rate of Interest X 1/12
| Interest on A’s Capital | = | 6,90,000 | X | 10 | X | 1 |
| 100 | 12 |
Interest on A’s Capital = 5,750/-
Calculation of Interest on B’s Capital by Product Method
We will do it with the product method because of Kanika withdrawal a different amount every time.
|
Period |
Amount of A’s Capital (A) |
Period Left after (B) |
Product (C=A*B) |
|---|---|---|---|
| April 01, 2018, to June 30, 2018 | 40,000 | 3 | 1,20,000 |
| July 01, 2018, to March 31, 2019 | 41,000 | 9 | 3,69,000 |
| Sum of Product | 4,89,000 |
Interest on Capital = Sum of Product X Rate of Interest X 1/12
| Interest on A’s Capital | = | 4,89,000 | X | 10 | X | 1 |
| 100 | 12 |
Interest on A’s Capital = 4,075/-
Case 2
Calculation of interest on partner's Drawings
Withdrawal at the end of each quarter = 7,500 p.m
It means 1st withdrawal has made on 30/06/2019
So, Time left from 30/06/2019 to 31/03/2020
are 9 Months
And last withdrawal has made on 31/03/2020
So, Time left from 31/03/2020 to 31/03/2020
are 0 Months
Now, put this time period in the formula
| Period | = | 9 + 0 | ||
| 2 | ||||
| Period | = | 9 | ||
| 2 | ||||
| Period | = | 4.5 |
| total Drawing | = | 7,500 | X | 4 |
=30,000
| Interest on Ashok’s Drawing | = | 30,000 | X | 10 | X | 4.5 |
| 100 | 12 |
Interest on A’s Drawing = 1,125/-
Case 3
Calculation of interest on partner's Drawings
Withdrawal at the end of each quarter = 7,500 p.m
It means 1st withdrawal has made on 15/05/2019
So, Time left from 15/05/2019 to 31/03/2020
are 10.5 Months
And last withdrawal has made on 15/02/2020
So, Time left from 15/02/2020 to 31/03/2020
are 1.5 Months
Now, put this time period in the formula
| Period | = | 10.5+ 1.5 | ||
| 2 | ||||
| Period | = | 12 | ||
| 2 | ||||
| Period | = | 6 |
| Total Drawing | = | 7,500 | X | 4 |
=30,000
| Interest on Ashok’s Drawing | = | 30,000 | X | 10 | X | 6 |
| 100 | 12 |
Interest on A’s Drawing = 1,500/-
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Also, Check out the solved question of previous Chapters: -
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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