Compute Interest on Capital
4. Afridi and Bhutto started business on 1st April, 2019 with a capital of 8,00,000 and 5,00,000 respectively
sharing profits in the ratio of 3: 2.
On 1st October, 2019, they decided that capital of the firm should be 15,00,000 and it should be shared
by the partners in their profit sharing ratio. Accordingly, they decided to introduce or withdraw their
capital. Interest on capital is allowed at 10% per annum
Calculate Interest on Capital for the year ending on 31st March, 2020.
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Given that Ratio of profits between Afridi and Bhutto is 3:2. Also new capital decided in total was 15,00,000 as on 1 October. Also the capital would be shared among them in their profit ratio. Therefore 3:2 of 15 lakh equals 9,00,000 for Afridi and 6,00,000 for Bhutto.
Also A/Q rate of interest allowed on capital is 10%.Therefore 10% of 6 lakh and 9 lakh = 60,000 and 90,000 respectively. In total 1,50,000.
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