Following is the extract of the Balance Sheet of, Neelkant and Mahdev as on March 31, 2017:
Balance Sheet as at March 31, 2017
| Liabilities | Amount (Rs.) | Assets | Amount (Rs.) |
| To Neelkant’s Capital | 10,00,000 | By Sundry Assets | 30,00,000 |
| To Mahadev’s Capital | 10,00,000 | ||
| To Neelkant’s Current Account | 1,00,000 | ||
| To Mahadev’s Current Account | 1,00,000 | ||
| To Profit and Loss Appropriation (March 2017) | 8,00,000 | ||
| 30,00,000 | 30,00,000 |
During the year Mahadev’s drawings were Rs 30,000. Profits during 2017 is Rs 10,00,000. Calculate interest on capital @ 5% p.a for the year ending March 31, 2017.
Calculation for Interest on Capital:
Neelkant = Capital `\times` Rate of Interest
= Rs. 10,00,000 `\times` `\frac{5}{100}`
= Rs. 10,00,000 `\times` `\frac{5}{100}`
= Rs. 50,000
Mahadev = Capital `\times` Rate of Interest
= Rs. 10,00,000 `\times` `\frac{5}{100}`
= Rs. 10,00,000 `\times` `\frac{5}{100}`
= Rs. 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 has been assumed that the capital of the partners is fixed.
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