Question

Calculate the amount of Interest on
Capital that would be shown in the
Capital Accounts X & Y when profit
shown by Profit & Loss A/c is 1,500
and capital invested by X & Yare
30,000 and 20,000 respectively (Rate of
Interest on capital is @ 10% p.a.).​

Answer 1

Given:

• The profit for the firm was Rs 1,500.
• The capitals of X and Y are Rs 30,000 and Rs 20,000.
• The interest rate on capital is @10% p.a.

To find: The amount of interest on capital.

Answer:

To find the interest on capital, simply multiply the rate by the capital amount. The resultant amount is taken on the credit side of the capital account.

Amount of interest on capital for X:

Interest on capital = Capital amount × Rate

Interest on capital = Rs 30,000 × 10/100

Interest on capital = Rs 3,000

Amount of interest on capital for Y:

Interest on capital = Capital amount × Rate

Interest on capital = Rs 20,000 × 10/100

Interest on capital = Rs 2,000

Therefore, the amount of interest on capital that would be shown in the capital accounts of X and Y is Rs 3,000 and Rs 2,000 respectively.