Rahul, Rohit and Karan started partnership business on April 1, 2016 with capitals of Rs 20,00,000, Rs 18,00,000 and Rs 16,00,000, respectively. The profit for the year ended March 2017 amounted to Rs 1,35,000 and the partner’s drawings had been Rahul Rs 50,000, Rohit Rs 50,000 and Karan Rs 40,000. The profits are distributed among partner’s in the ratio of 3:2:1. Calculate the interest on capital @ 5% p.a.
Answers
Given : Rahul, Rohit and Karan started partnership business on April 1, 2016 with capitals of Rs 20,00,000, Rs 18,00,000 and Rs 16,00,000, respectively.
The profit for the year ended March 2017 amounted to Rs 1,35,000 and the partner’s drawings had been Rahul Rs 50,000, Rohit Rs 50,000 and Karan Rs 40,000. The profits are distributed among partner’s in the ratio of 3:2:1.
Solution :
Interest on capital :
Rahul's = 20,00,000 × 5/100
= 20000 × 5
Rahul's Interest on capital = ₹ 1,00,000
Rohit's = 18,00,000 × 5/100
= 18000 × 5
Rohit's Interest on capital = ₹ 90,000
Karan's = 16,00,000 × 5/100
= 16000 × 5
Karan's Interest on capital = ₹ 80,000
** As interest on capital is calculated on the opening capitals , rest of the information apart from opening capital is irrelevant.
Extra information :
Interest on capitals :
If interest on capital is to be allowed, provision to this effect must be contained in the partnership deed. In the absence of any such provision no interest on capital can be claimed by any partner as a matter of right. Interest on capital is always calculated with reference to the time it remains in the business. It is calculated on the opening capitals and adjusted capitals after considering further capital introduced and capital withdrawn.
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