ORISON ACADEMY
CLASS: 12
SUB: ACCOUNTANCY
TOPIC: PARTNERSHIP BASIC CONCEPT
INTEREST ON CAPITAL
INTEREST ON CAPITAL
Always it should be calculated on opening capital
If closing capital is given – find opening capital( closing capital + drawings –
profit – additional capital)
Calculate the no of months ( in case of additional and drawings)
Interest on capital is cal on 31.3
1.4 50000 1.10 10000 6
50000 *6/100 - 10000*6/100*6/12
3000-300
2700
14. 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 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.
(Ans : Rahul, Rs. 1,00,000, Rohit, Rs. 90,000, Karan Rs. 80,000)
Interest on capital
Rahul = 2000000 *5/100 = 100000
Rohit = 1800000 *5/100 =90000
Karan = 1600000*5/100=80000
ORISON ACADEMY
CLASS: 12
SUB: ACCOUNTANCY
TOPIC: PARTNERSHIP BASIC CONCEPT
INTEREST ON CAPITAL
15. Sunflower and Pink Rose started partnership business on April 01, 2016
with capitals of Rs. 2,50,000 and Rs.1,50,000, respectively. On October 01,
2016, they decided that their capitals should be Rs. 2,00,000 each. The
necessary adjustments in the capitals are made by introducing or withdrawing
cash. Interest on capital is to be allowed @ 10% p.a. Calculate interest on
capital as on March 31, 2017.
(Ans : Total interest on Sunflower’s Capital Rs. 22,500 and on Pink Rose’s
Capital, Rs. 17,500)
Sunflower = 250000 (200000) 50000 on 01.10.2016
Pink rose = 150000(200000)50000 on 01.10.2016
Interest on capital
Sunflower
( 250000 *10/100)-(50000*10/100*6/12)
25000-2500
22500
Pink rose
(150000*10/100)
16. On March 31, 2017 after the close of accounts, the capitals of Mountain,
Hill and Rock stood in the books of the firm at Rs. 4,00,000,Rs.3,00,000 and
Rs. 2,00,000, respectively. Subsequently, it was discovered that the interest on
capital @ 10% p.a. had been omitted. The profit for the year amounted to Rs.
1,50,000 and the partner’s drawings had been Mountain: Rs. 20,000, Hill Rs.
15,000 and Rock Rs. 10,000. Calculate interest on capital.
(Ans : Interest on Capital: Mountain, Rs.37,000; Hill, Rs.26,500; Rock,
Rs.16,000)
mountain hill rock
Closing capital 400000 300000 200000
+ drawings 20000 15000 10000
- Profit 50000 50000 50000
ORISON ACADEMY
CLASS: 12
SUB: ACCOUNTANCY
TOPIC: PARTNERSHIP BASIC CONCEPT
INTEREST ON CAPITAL
Opening 370000 265000 160000
capital
Interest on capital
Mountain = 370000*10/100 =37000
Hill = 265000*10/100 =26500
Rock = 160000*10/100 =16000
They are maintaining fixed capital
INTEREST ON DRAWINGS
1. Fixed amount for whole year (at beginning , at middle, at end)
2. Varying amount at required time (product method)
At the beginning
12 +1*% 6(1/2)
Amount for the whole year *13/2*%/100*1/12
At the middle 6
ORISON ACADEMY
CLASS: 12
SUB: ACCOUNTANCY
TOPIC: PARTNERSHIP BASIC CONCEPT
INTEREST ON CAPITAL
At the end 11/2
12/2= 6
Amount for the whole year *6*%100*1/12
18. Rishi is a partner in a firm. He withdrew the following amounts during the
year ended March 31, 2017. May 01, 2017 Rs. 12,000 July 31, 2017 Rs. 6,000
September 30, 2017 Rs. 9,000 November 30, 2017 Rs. 12,000 January 01, 2018
Rs. 8,000 March 31, 2018 Rs. 7,000 Interest on drawings is charged @ 9
Calculate interest on drawings
(Ans : Interest on Drawing Rs. 2,295)
date amount Time period Product
01.05.2017 12000 11(12000*11) 132000
31.07.2017 6000 8(6000*8) 48000
30.9.2017 9000 6*9000 54000
30.11.2017 12000 4*12000 48000
01.01.2018 8000 3*8000 24000
31.03.2018 7000 0 0
(306000)
Interest on drawings
Product *rate/100*1/12
Rishi = 306000*9/100*1/12
= 2295
19. The capital accounts of Moli and Golu showed balances of Rs.40,000 and
Rs. 20,000 as on April 01, 2016. They shared profits in the ratio of 3:2. They
allowed interest on capital @ 10% p.a. and interest on drawings, @ 12 p.a. Golu
advanced a loan of Rs. 10,000 to the firm on August 01, 2016.
During the year, Moli withdrew Rs. 1,000 per month at the beginning of every
month whereas Golu withdrew Rs. 1,000 per month at the end of every month.
Profit for the year, before the above mentioned adjustments was Rs.20,950.
ORISON ACADEMY
CLASS: 12
SUB: ACCOUNTANCY
TOPIC: PARTNERSHIP BASIC CONCEPT
INTEREST ON CAPITAL
Calculate interest on drawings show distribution of profits and prepare partner’s
capital accounts.
(Ans : Interest on Drawings : Moli, Rs. 780; Golu, Rs. 660; Profits Moli, Rs.
9,594; Golu, Rs. 6,396)
20. Rakesh and Roshan are partners, sharing profits in the ratio of 3:2 with
capitals of Rs. 40,000 and Rs. 30,000, respectively. They withdrew from the
firm the following amounts, for their personal use:
Rakesh
Month Rs.
May 31, 2016 600
June 30, 2016 500
August 31, 2016 1,000
November 1, 2016 400
December 31, 2016 1,500
January 31, 2017 300
March 01, 2017 700
Rohan At the beginning of each month 400 Interest on drawings is to be
charged @ 6% p.a. Calculate interest on drawings, assuming that book of
accounts are closed on March 31, 2017, every year.
(Ans : Interest on Rakesh’s Drawings : Rs. 126.50; Rohan’s Drawings Rs. 156
rounded off to nearest rupee)
21. Himanshu withdrew Rs. 2,500 at the end of each month. The Partnership
deed provides for charging interest on drawings @ 12% p.a. Calculate interest
on Himanshu’s drawings for the year ending March 31, 2017.
(Ans : Interest on Drawings Rs.1,650)
Interest on drawings og Himanshu
ORISON ACADEMY
CLASS: 12
SUB: ACCOUNTANCY
TOPIC: PARTNERSHIP BASIC CONCEPT
INTEREST ON CAPITAL
At the end = total amount *6*rate/100*1/12
= 30000*11/2*12/100*1/12
= 1650
22. Bharam is a partner in a firm. He withdraws Rs. 3,000 at the starting of each
month for 12 months. The books of the firm are closed on March 31 every year.
Calculate interest on drawings if the rate of interest is 10% p.a.
At the beginning =13/2
Total amount =3000*12 =36000
Interest on drawings
= 36000*13/2*10/100*1/12
=3600*13/2*1/12
= 1800*13*1/12
=23400/12
= 1950
(Ans : Interest on Drawings, Rs.1,950
23. 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.
(Ans : Raj Rs. 11,000 and Neeraj’s Rs. 9,000)
24. Amit and Bhola are partners in a firm. They share profits in the ratio of 3:2.
As per their partnership agreement, interest on drawings is to be charged @
10% p.a. Their drawings during 2017 were Rs. 24,000 and Rs. 16,000,
respectively. Calculate interest on drawings based on the assumption that the
amounts were withdrawn evenly, throughout the year.
ORISON ACADEMY
CLASS: 12
SUB: ACCOUNTANCY
TOPIC: PARTNERSHIP BASIC CONCEPT
INTEREST ON CAPITAL
Interest on drawings
Amit =24000*10/100*6*1/12
=2400*6/12
= 2400*1/2
= 1200
Bhola =16000*10/100*6*1/12
=1600*1/2
=800
(Ans : Interest on Amit’s Drawings, Rs. 1,200 and Bhola’s, Rs.800)
25. Harish is a partner in a firm. He withdrew the following amounts during the
year 2017 : Rs.
February 01 4,000
May 01 12,000
June 30 4,000
October 31 12,000
December 31 4,000
Interest on drawings is to be charged @ 1 2 % p.a. Calculate the amount of
interest to be charged on Harish’s drawings for the year ending December 31,
2017.
(Ans : Interest on Drawings, Rs.1,800)
26. Menon and Thomas are partners in a firm. They share profits equally. Their
monthly drawings are Rs. 2,000 each. Interest on drawings is to be charged @
10% p.a. Calculate interest on Menon’s drawings for the year 2006, assuming
that money is withdrawn:
(i) in the beginning of every month,
(ii) in the middle of every month, and
ORISON ACADEMY
CLASS: 12
SUB: ACCOUNTANCY
TOPIC: PARTNERSHIP BASIC CONCEPT
INTEREST ON CAPITAL
(iii) at the end of every month.
AT THE BEGINNING
Total amount = 2000*12 =24000
24000 *13/2*10/100*1/12 =
2400*13/2*1/12
1200*1/12*13
1000*13
1300
AT THE MIDDLE
Total amount *10/100*6*1/12
24000*10/100*6*1/12
2400*1/2
1200
AT THE END
Total amount *11/2*10/100*1/12
24000*11/2*10/100*1/12
2400*11/2*1/12
1000*11
1100
(Ans : (i) Interest on Drawings, Rs.1,300; (ii) Rs.1,200; (iii) Rs.1,100)
ORISON ACADEMY
CLASS: 12
SUB: ACCOUNTANCY
TOPIC: PARTNERSHIP BASIC CONCEPT
INTEREST ON CAPITAL
27. On March 31, 2017, after the close of books of accounts, the capital
accounts of Ram, Shyam and Mohan showed balance of Rs. 24,000 Rs. 18,000
and Rs. 12,000, respectively. It was later discovered that interest on capital @
5% had been omitted. The profit for the year ended March 31, 2017, amounted
to Rs. 36,000 and the partner’s drawings had been Ram, Rs. 3,600; Shyam, Rs.
4,500 and Mohan, Rs. 2,700. The profit sharing ratio of Ram, Shyam and
Mohan was 3:2:1. Calculate interest on capital.
(Ans : Interest on Ram’s Capital Rs.480; Shyam’s Capital, Rs.525 and Mohan’s
Capital, Rs.435)
