simrat and Bir are partners in a firm sharing profit and losses in the ratio of 3 is to 2 on 31st March 2019 after closing the books of accounts their capital accounts stood at 480000 and 600000 respectively on 1st May 2018 Simran introduced land additional capital of 120000 and Veer INR withdrawal rupees 60000 from he is capital on 1st October 2018 Simran withdrawal rupees 240000 from her capital and weed introduced 3 lacs interest on capital is allowed at 6% per annum subsequently it was noted that interest on capital @ 6% per annum had been omitted proft for the year ended 31 march 2019 amounted to 240000 and the partners drawing has been simarat 120000 and bir 60000. compute the intrest on capitals are (a)fixed and (b)fluctuating
Answers
Answer:
In case of fixed capital
Simrat - 35,400
Bir,- 27,300
In case of fluctuating capitals
Simrat - 33,960
Bir - 25,140
Explanation:
To calculate the interest on capital for the year ended 31st March 2019, we need to consider the following steps:
1. Calculate the average capital for the year. Average capital = (Simrat's capital on 1st May 2018 + Veer's capital on 1st May 2018 + Simrat's additional capital + Veer's withdrawal + Simrat's withdrawal + Interest allowed) / 2
= (480000 + 600000 + 120000 - 60000 + -240000 + 30000) / 2 = (1260000) / 2 = 630000
2. Calculate the interest on capital based on average capital and the interest rate. Interest on capital = Average capital * Interest rate
= 630000 * 6% = 3780
(a) Fixed Interest on Capital: In a fixed interest on capital, the interest on capital is fixed and remains constant for the year, regardless of the profit or loss of the firm. The interest is charged on the agreed capital. In this case, the interest on capital for the year ended 31st March 2019 is 3780.
(b) Fluctuating Interest on Capital: In a fluctuating interest on capital, the interest on capital is calculated based on the profit or loss of the firm. The interest rate is applied to the actual capital of each partner. In this case, the profit for the year ended 31st March 2019 was 240000. The interest on capital for Simrat and Veer can be calculated as follows:
Interest on capital for Simrat = (Simrat's capital + interest allowed - Simrat's withdrawal) * Interest rate = (480000 + 120000 + 30000 - 240000) * 6% = 39000
Interest on capital for Veer = (Veer's capital + interest allowed - Veer's withdrawal) * Interest rate = (600000 + 30000 - 60000) * 6% = 36000
So, the interest on capital for Simrat and Veer is 39000 and 36000 respectively.
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