From the following information, calculate interest on Capital of C, a partner for the year ended 31st March, 2022.
C's Capital on 31/3/2022: ₹12,00,000
Profit credited to C for the year ended 31/3/2022: ₹3,00,000
Drawings made during the year: ₹1,00,000
Additional Capital introduced on 1/10/21: ₹5,00,000
Rate of Interest = 12 % p.a.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹90,000
Interest on capital is calculated on the capital at the beginning of the year, plus interest on any additional capital from the date it was brought in. Only the closing capital is given, so the opening capital is worked back from it.
Opening capital
Closing capital = ₹12,00,000
Less: Profit credited = ₹3,00,000
Add: Drawings = ₹1,00,000
Less: Additional capital = ₹5,00,000
Opening capital (1 April 2021) = ₹5,00,000
Interest on capital @ 12% p.a.
On opening capital = ₹5,00,000 × 12/100 = ₹60,000
On additional capital for 6 months (1/10/21 to 31/3/22) = ₹5,00,000 × 12/100 × 6/12 = ₹30,000
Total interest on capital = ₹90,000
NCERT (2026-27 edition): |