Ram and Mohan are partners in a business. Their capitals at the end of the year were ₹ 24,000 and ₹ 18,000 respectively. During the year, Ram’s drawings and Mohan’s drawings were ₹ 4,000 and ₹ 6,000 respectively. Profit (Before charging interest on capital) during the year was ₹ 16,000. Calculate interest on capital @ 5% p.a. for the year ended 31st March, 2018.
Answers
Interest on Ram's capital = 1000 Interest on Mohan's capital = 800
Explanation:
Calculation of capital at the beginning
Particulars Ram Mohan
Capital at the end 24,000 18,000
Less: Profit already credited (1:1) (8,000) (8,000)
Add: Drawings already debited 4,000 6,000
∴ Capital at the beginning = 20,000 16,000
Interest on Ram's capital = 20,000 x 5 = Rs. 1000
100
Interest on Mohan's capital = 18,000 x 5 = Rs. 800
100
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