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.
The solution of Question 35 Chapter 2 of +2-A:
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
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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 |
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Interest on A’s Drawing = 1,500/-
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Also, Check out the solved question of previous Chapters: –
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T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
- Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
- Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
- Chapter No. 3 – Goodwill: Nature and Valuation
- Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
- Chapter No. 5 – Admission of a Partner
- Chapter No. 6 – Retirement/Death of a Partner
- Chapter No. 7 – Dissolution of a Partnership Firm
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
- Chapter No. 4 – Accounting Ratios
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
