Q.10 A and B are partners in a firm. Their capitals as on 1st April 2016 were Rs.2,10,000 and Rs.90,000 respectively. They share profits in the ratio of 2:1. On 1st August 2016 they decided that their capitals should be readjusted according to their PSR. The necessary adjustments in capital were made by withdrawing and introducing capital in cash. Interest on capital is allowed at 12% p.a. Compute interest on capital for the year ending 31st March 2017.

Dear Student

 Calculation of Interest on Capital - A Date Amount Introduced / (Withdrawn) No. of Months to 31-3-17 Interest @ 12% 1-Apr-16 210,000 12 25,200 1-Aug-16 (10,000) 8 (800) Total 200,000 24,400

 Calculation of Interest on Capital - B Date Amount Introduced / (Withdrawn) No. of Months to 31-3-17 Interest @ 12% 1-Apr-16 90,000 12 10,800 1-Aug-16 10,000 8 800 Total 100,000 11,600

Capital Adjustment for both the partners :
 Capital of A Before any adjustment 210,000 Capital of B Before any adjustment 90,000 Total Capital 300,000 Capital of A as per PSR (3,00,000 x 2/3) 200,000 Cash A would withdraw (2,10,000 - 2,00,000) 10,000 Capital of B as per PSR (3,00,000 x 1/3) 100,000 Cash B would bring (1,00,000 - 90,000) 10,000

Regards

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