Question 1 1 / -0
In the absence of an agreement to the contrary, the partners are :
Solution
Interest on capital is a mode of appropriation of profits to partners. Interest on capital is an income on the capital contributed by the partners. Interest on capital is calculated on time basis having regard to the introduction of fresh capital and withdrawal of capital.
Interest on capital can only be provided if there is a provision to that effect in the partnership deed. If the partnership deed is silent, then interest on capital is not allowed.
Question 2 1 / -0
A and B are partners having capital of Rs. 50,000 and Rs. 60,000 respectively. Interest on capital is given @ 5% p. a. Profits for the year before the appropriation is Rs. 4.600 provide interest on capital out of profits. Interest allocated to partners is:
Solution
Interest on capital = Capital x Rate of interest
A :-
= Rs.50,000 x 5/100
= RS-2,500.
B:-
= Rs. 60,000 x 5/100
= RS-3,000.
Total appropriation = Rs. 2,500 + Rs. 3,000 = Rs. 5,500.
Apportioned in the ratio of interest to be allowed to the extent of profits available:-
A:-
= 2,500
-------------- x 4,600
5,500
= RS-2,091.
B:-
= 3,000
------------- x 4,600
5,500
= RS-2,509.
Question 3 1 / -0
Harish is a partner in a firm. He withdrew the following amounts during the year 2017:
Solution
Date No. of months till Workings Total
May 1 11 months 4,000 x 11/12 x 7.5/12 RS-275
August 1 8 months 10,000 x 8/12 x 7.5/12 RS-500
September 30 6 months 4,000 x 6/12 x 7.5/12 RS-150
January 31 2 months 12,000 x 2/12 x 7.5/12 RS-150
March 31 0 0 0
Total interest = RS-1,075
Question 4 1 / -0
A and B are Partners sharing profits in the ratio of 3:2 with capitals of Rs. 50,000 and Rs. 30,000 respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed an annual salary of Rs. 2,500. During 2016, the profits of the year prior to calculation of interest on capital but after charging B's salary amounted to Rs. 12,500. Calculate the amount of profits to be distributed to A and B after the above effect.
Solution
A and B share profits in ratio 3:2
Profit & Loss Appropriation A/c
Particulars (Dr.) Amount Particulars (Cr.) Amount To interest on capital 4,800 By P&l a/c 12,500 15,000
Hence, A's share of proit is $$Rs4,620$$ whereas B's share is $$Rs3,080$$
Question 5 1 / -0
Calculate the interest on drawings of Ram @ 10% p.a. for the year ended 31st March 2017, If he withdrew Rs 3,000 at the end of every month. Assuming that drawings were made evenly throughout the year.
Solution
Assuming that the drawings were made evenly throughout the year, the interest on drawings has been calculated for an average period of 6 months. Interest on Drawings = Total Drawings x Rate/100 x 5.5/12 Interest on Drawings = Rs. 3000 $$\times$$ 12 $$\times$$ 10/100 $$\times$$ 5.5/12
Interest on Drawings = Rs. 1650
Question 6 1 / -0
M and N are partners in a firm. M has given a loan of Rs. 8,000 to the firm on 1st July, 2017. The partnership deed is silent upon the question of provision of interest on partner's loan. Compute the amount of interest payable on the loan advanced by M to the firm, assuming the books are closed on 31st March each year.
Solution
Amount of loan given by M to the firm (on 1st July, 2017) = Rs. 8,000 Period (from 1st July, 2017 to 31st March, 2018) = 9 months Interest rate = 6% p.a. Interest on M's loan = 8,000 x 6/100 x 9/12 = 360
Question 7 1 / -0
John, a partner in Modern Tours and Travels withdrew money during the year ending March 31, 2016 from his capital account, for his personal use. Calculate interest on drawings, if rate of interest is 9 per cent per annum. If an amount of Rs. $$3,000$$ per month was withdrawn by him at the end of each month.
Solution
Using the average method: Interest on Drawings = (3,000 x 12) x 9/100 x [(longest outstanding period + shortest outstanding period)/2]/12
= (3,000 x 12) x 9/100 x [(11 + 0)/2]/12
= (3,000 x 12) x 9/100 x (5.5/12)
= 1,485
Question 8 1 / -0
Kiran, a partner in a firm, withdrew money from his capital account during the year ended 31, March 2017. If the amounts withdrawn were: Rs. $$12,000$$ on June 01, 2015, Rs. $$8,000$$; on August 31, 2015, Rs. $$3,000$$; on September 30, 2015, Rs. $$7,000$$, on November 30, 2015, and Rs. $$6,000$$ on January 31, 2016. Calculate interest in drawings, if rate of interest is $$9$$ per cent per annum.
Solution
S.No. Amount withdrawn Date of drawing No. of months Product 1. 12,000 01.06.2015 10 1,20,000 2. 8,000 31.08.2015 7 56,000 3. 3,000 30.09.2015 6 18,000 4. 7,000 30.11.02015 4 28,000 5. 6,000 31.01.2016 2 12,000 Total Product 2,34,000 Interest on Drawings Total Product x Rate of Interest x Common Factor 2,34,000x 9% x 1/12 1,755 (Rate of Interest = 9%) (Common factor = 1/12)
Question 9 1 / -0
John, a partner in Modern Tours and Travels withdrew money during the year ending March 31, 2016 from his capital account, for his personal use. Calculate interest in drawings if rate of interest is $$9$$ per cent per annum and If he withdrew Rs. $$3,000$$ per month at the beginning of the month.
Solution
Using the average method:
Interest on drawings = (3,000 x 12) x 9/100 x [(longest outstanding period+shortest outstanding period)/2]/12
=(3,000 x 12) x 9/100 x [(12+1)/2]/12
=36,000 x 9/100 x 6.5/12
=1,755
Question 10 1 / -0
Kamal and Vimal are partners in a firm. They share profits equally. Their monthly drawings are Rs 2,000 each. Interest on drawings is to be charged at 10% p.a. Calculate interest on Kamal and Vimal's drawings for the year 2016, assuming that amount is withdrawn in the beginning of every month.
Solution
Interest on drawings = Amount withdrawn x Rate x Average Period/12
= Rs2,000 x 12 x 10/100 x 6.5/12
= Rs.24,000 x 10/100 x 6.5/12
= Rs.1,300 for Kamal
= Same Rs 1300 for Vimal.
Hence, option (D) is the correct answer.
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