Raj and Neeraj are partners in a firm. Their capitals as on April 01, 2017 were Rs 2,50,000 and Rs 1,50,000, respectively. They share profits equally. On July 01, 2017, they decided that their capitals should be Rs 1,00,000 each. The necessary adjustment in the capitals were made by introducing or withdrawing cash by the partners’. Interest on capital is allowed @ 8% p.a. Compute interest on capital for both the partners for the year ending on March 31, 2018.
Answers
Given : Raj and Neeraj are partners in a firm. Their capitals as on April 01, 2017 were Rs 2,50,000 and Rs 1,50,000, respectively.
They share profits equally. On July 01, 2017, they decided that their capitals should be Rs 1,00,000 each. The necessary adjustment in the capitals were made by introducing or withdrawing cash by the partners’. Interest on capital is allowed @ 8% p.a.
Solution :
Interest on Ram's capitals @ 8% p.a :
From 1 April 2017 to 1st July 2017 = 250000 × 8/100 × 3/12
= 5000
From 1 July 2017 to 31st March 2018 = 1,00,000 × 8/100 × 9/12
= 6000
Total interest in Ram's Capital = 5000 + 6000 = 11000
Interest on Neeraj's capitals @ 8% p.a :
From 1 April 2017 to 1st July 2017 = 150000 × 8/100 × 3/12
= 3000
From 1 July 2017 to 31st March 2018 = 1,00,000 × 8/100 × 9/12
= 6000
Total interest in Neeraj's Capital = 3000 + 6000 = 9000
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It is calculated on the opening capitals and adjusted capitals after considering further capital introduced and capital withdrawn.
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