Page No 2.86:
Question 26: A and B are partners in the ratio of 3:2. The firm maintains Fluctuating Capital Accounts and the balance of the same as on 31st March, 2020 amounted to R 1,60,000 and 1,40,000 for A and B respectively. Their drawings during the year were 30,000 each.
As per Partnership Deed, interest on capital@ 10% p.a. on opening capitals had been provided to them.
Calculate opening capitals of partners given that their profit was 90,000. Show your workings clearly.
Answer:
Calculation of opening Capital
|
A
|
B
|
Closing Capital
Add; Drawings
|
1,60,000
30,000
|
1,40,000
30,000
|
Less: Profit already Credited (WN)
|
1,90,000
37,800
|
1,70,000
25,200
|
Less: Interest on Capital (WN)
|
1,52,200
13,836
|
1,44,800
13,164
|
Opening Capital
|
1,38,364
|
1,31,636
|
Working Notes:
Total
Capital of A and B (1,60,000+1,40,000) Add: Drawings
(30,000×2) |
= = |
3,00,000 60,000 |
Less: Profits
(Including Interest on Capital) |
= |
3,60,000 90,000 |
Total
opening Capital Including Interest on Capital |
= |
2,70,000 |
Interest on Capital @10 p.a. 2,70,000 is 27,000
Divisible Profits= 90,000 - 27,000 = 63,000
Distribution
of profits
A = 63,000×3/5=37,800
B = 63,000×2/5=25,200
Page No 2.86:
Question 27:
Following is the extract of the Balance Sheet of Neelkant and Mahadev as on 31st March, 2021.
BALANCE SHEET |
|||
Liabilities |
` |
Assets |
` |
Neelkant's
Capital |
10,00,000 |
Sundry Assets |
30,00,000 |
Mahadev's
Capital |
10,00,000 |
|
|
Neelkant's
Current A/c |
1,00,000 |
|
|
Mahadev'
Current A/c |
1,00,000 |
|
|
Profit and Loss
Appropriation A/c (2020-21) |
8,00,000 |
|
|
|
30,00,000 |
|
30,00,000 |
|
|
|
|
During the year, Mahadev's drawings were ` 30,000. Profits during the
year ended 31st March, 2021 is ` 10,00,000. Calculate interest
on capital @ 5% p.a. for the year ending 31st March, 2021.
Answer:
Interest on Capital
Neelkant’s |
=
10,00,000×5/100=50,000 |
Mahadev’s |
=
10,00,000×5/100=50,000 |
Note: In this question, as the balances of both
Partner's Capital Account and of Partner's Current Account are mentioned, so it
is clear that the capital of the partners is fixed.
As we know, when the capital of the partners is fixed, drawings and interest on
capital does not affect the capital balances of the partners. Rather, it would
affect their current account balances. Therefore, in this case, capital at the
beginning (i.e. opening capital) and capital at the end (i.e. closing capital)
of the year would remain same. Thus, the interest on capital is calculated on
fixed capital balances (given in the Balance Sheet of the question).
Page No 2.87:
Question 28:
From the following Balance Sheet of Long and Short, calculate interest on capital @ 8% p.a. for the year ended 31st March, 2021.
BALANCE SHEET |
||||
Liabilities |
` |
Assets |
` |
|
Long's Capital A/c |
1,20,000 |
Fixed Assets |
3,00,000 |
|
Short's Capital A/c |
|
1,40,000 |
Other Assets |
60,000 |
General Reserve |
|
1,00,000 |
|
|
|
3,60,000 |
|
3,60,000 |
|
|
|
|
|
During the year, Long withdrew ` 40,000 and Short withdrew `
50,000. Profit for the year was ` 1,50,000
out of which `
1,00,000 was transferred to General Reserve.
Answer:
Calculation of Capital at the beginning (as
on April 01, 2020)
Particulars |
Long |
Short |
Capital at the end |
1,20,000 |
1,40,000 |
Less: Adjusted Profit (1,50,000 – 1,00,000) in 1:1 ratio |
(25,000) |
(25,000) |
Add: Adjusted Drawings |
40,000 |
50,000 |
Capital in the beginning |
1,35,000 |
1,65,000 |
|
|
|
Long’s Interest on capital= 1,35,000×8/100=10,800
Short’s Interest on capital= 1,65,000×8/100=13,200
Page No 2.87:
Question 29:
Amit and Bramit started business on 1st April, 2020 with capitals of ` 15,00,000 and ` 9,00,000 respectively. On 1st October, 2020, they decided that their capitals should be ` 12,00,000 each. The necessary adjustments in capitals were made by introducing or withdrawing by cheque. Interest on capital is allowed @ 8% p.a. Compute interest on capital for the year ended 31st March, 2021.
Answer:
Calculation of Interest on Amit’s Capital
Date |
Capital |
× |
Period |
= |
Product |
April 01, 2020 to Sept. 30, 2020 |
15,00,000 |
× |
6 |
= |
90,00,000 |
Oct. 01, 2020 to March 31, 2021 |
12,00,000 |
× |
6 |
= |
72,00,000 |
Sum of Product |
|
1,62,00,000 |
|||
|
|
Interest on
Capital = sum of product×Rate of drawing/100×1/ 12
Interest on
Capital =1,62,00,000×8/100×1/12 =1,08,000
Calculation of Interest on Bramit’s Capital
Date |
Capital |
× |
Period |
= |
Product |
April 01, 2020 to Sept. 30, 2020 |
9,00,000 |
× |
6 |
= |
54,00,000 |
Oct. 01, 2020 to March 31, 2021 |
12,00,000 |
× |
6 |
= |
72,00,000 |
Sum of Product |
|
1,26,00,000 |
Interest on
Capital = sum of product×Rate of drawing/100×1/ 12
Interest on
Capital =1,26,00,000×8/100×1/12 =84,000
Page No 2.87:
Question 30:
Moli and Bholi
contribute `20,000 and ` 10,000
respectively towards capital. They decide to allow interest on capital @ 6%
p.a. Their respective share of profits is 2 : 3 and
the net profit for the year is
`1,500. Show distribution of profits:
(i) where there is no agreement except for interest
on capitals; and
(ii) where there is an agreement that the interest on capital as a charge.
Answer:
Calculation
of Interest on Capital
Interest on Moli's Capital=
20,000×6/100=1,200
Interest on Bholi's Capital=10,000×6/100=600
Total Amount of Interest on Capital=1,200+600=1,800
Case
(a)
Where there is no clear agreement except for
interest on capitals
Profit for the year ended =
` 1,500
Total amount of interest = `
1,800
Here, total amount of interest on capital is more
than the profit available for distribution. Therefore, profit of ` 1,500 is
distributed between Moli and Bholi in
the ratio of their interest on capital.
Particulars |
Moli |
: |
Bholi |
Interest on Capital |
1,200 |
: |
600 |
or, Ratio of interest on
Capital |
2 |
: |
1 |
Moli will get Interest on Capital=1,500×2/3=1,000
Bholi will get Interest on Capital=1,500×1/3=500
Case
(b)
In case, there is a clear agreement that the
interest on capital will be allowed even if the firm has incurred loss, then
the whole amount of interest on capital is to be allowed to the partners.
Interest on Moli's Capital=20,000×6/100=1,200
Interest on Bholi's Capital=10,000×6100=600
Total Amount of Interest on Capital=(1,200+600)=1,800
Total Profit of the firm = `
1,500
Therefore, loss to the firm amounts to `300(`1,500-`1,800). This loss
is to shared by Moli and
Bholi in their profit sharing ratio that is 2 : 3.
Loss to Moli=300×2/5= 120
Loss to Bholi=300×3/5=180
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