(Interest On Capital/Drawings & Profits Given) From The Following Balance Sheet of Rich and Poor, Calculate Interest On Capital @10% P.A. For The Year Ended 31-3-17

Question 26 Chapter 2 of +2-Part-1
26. (Interest on Capital/Drawings & Profits given) From the following balance sheet of Rich and
Poor, calculate interest on capital @10% p.a. for the year ended 31-3-17.
Balance Sheet
Liabilities Amount Assets Amount
Rich’s Capital 20,000 Sundry Assets 42,000
Poor’s Capital 16,000 Drawings – Rich 2,000
Profit & Loss Appropriation a/c (2016-17) 8,000
44,000 44,000
Calculation of Capital as on 1st April 2016
Particulars
A B
Capital as on 31st March 2017 20,000 16,000
Add:
Drawings during the year (Poor) – 5,000
Rich’s Drawings (3,000-2,000)(WN1) 1,000 –
Less:
Share in Profit (12,000-8,000)(WN2) (-2000) (-2000)
Capital as on 31st March 2016 19,000 19,000
Interest on Capital @10% p.a. 1,900 1,900

Working Note:
1. Rich’s drawings appearing in B/S Rs.2,000 means that they are still not adjusted out of total
drawings of Rs.3,000. Hence, Only Rs.1,000 (i.e. 3,000-2,000) drawings are added back which have
already been adjusted.
2. Just like drawings, profits are also not adjusted to the Rs.8,000 appearing in B/S. So, only profit
already adjusted i.e. Rs.12,000-8,000 = Rs.4,000 are to be adjusted for calculating opening capital.
27. Money and Rupee are partners sharing profits in the ratio of 2:1. Their capitals were Rs.1,20,000
and Rs. 90,000 respectively.
Show the distribution of profits/losses in each of the following alternative cases:
Case A: Profits are Rs.45,000 and deed is silent as regards interest on capital.
Case B: Profits are Rs.45,000 and deed provides for interest on capital @10% p.a.
Case C: Profits are Rs.16,800 and deed provides for interest on capital @10% p.a.
Case D: Profit is Rs.16,800 and deed provides for interest on capital @10% p.a. even there is a loss.
Case E: Loss is Rs.6,000 and deed provides for interest on capital @10% p.a. even there is a loss.
Case – A :
Money’s Share in profit 2/3 i.e. Rs.30,000
Rupee’s Share in profit 1/3 i.e. Rs.15,000
Note: No interest on capital will be allowed.
Case – B :
Net profit after interest on Capitals:
Rs.(45,000-12,000-9,000) = Rs.24,000
Money’s Share in profit (2/3 of Rs.24,000) i.e. Rs.16,000
Rupee’s Share in profit (1/3 of Rs.24,000) i.e. 8000
Case – C :
Net profit after interest on Capitals:
Rs.(12,000+9,000-16,800) = Rs.4,200,
Money’s Share of loss on Capital ratio = (Rs.4,200*4/7) i.e. Rs.2,400
Rupee’s Share of loss on Capital ratio = (Rs.4,200*3/7) i.e. Rs.1,800
Money’s Share in profit = Interest on Capital (12,000-2,400) = Rs.9,600
Rupee’s Share in profit = Interest on Capital (9,000-1,800) = Rs.7,200
Case – D :
Particulars
Interest on Capital:
-Money 12,000
-Rupee 9,000 21,000
Less: Net Profit 16,800
Net Loss 4,200
Money’s Share of loss =2/3*4,200 i.e. Rs.2,800

Rupee’s Share in loss= 1/3*4,200 i.e. Rs.1,400
Case – E :
Particulars
Interest on Capital:
-Money 12,000
-Rupee 9,000 21,000
Less: Net Profit 6,000
Net Loss 27,000
Money’s Share of loss =2/3*27,000 i.e. Rs.18,000

Rupee’s Share in loss= 1/3*27,000 i.e. Rs.9,000
28. (Interest on Drawings/Evenly throughout the year) A and B are partners in a firm. They share
profits and losses in the ratio of 3:2. As per their partnership agreement, interest on drawings is to be
charged @10% p.a. Their drawings during 2016-17 were Rs.24,000 and Rs. 16,000 respectively.
Calculate interest on drawings based on the assumption that the amounts were withdrawn evenly
throughout the year.
Interest on Drawings:
A : 24,000*10/100*6/12 = Rs. 1,200
B : 16,000*10/100*6/12 = Rs. 800
Note: When the date of drawings is not mentioned, interest is always charged on an average basis.
29. (Interest on Drawings/Drawings at beginning, middle and end of each month) A and B are
partners in a firm. Their monthly drawings are Rs.2,000 each. Interest on drawings is to be charged
@10% each.
Calculate interest on A’s drawings for the year 2016-17 assuming drawings are made
1.In the beginning of every month
2.In the middle of every month
3. At the end of every month.
Calculation of interest on partner’s Drawings

If partners withdrawal the same amount of drawing on a regular basis then we can calculate the
interest on drawing with help of following formula: –
Interest on Drawing = Total Drawings X Rate of Interest X Period/12 Months
Rate of Interest = 10%
Period = the period/time will be calculated with the help of following formula: –
Time left after 1st withdrawal + Time left after Last withdrawal
Period =
2
1. Calculation of interest on Muthu’s Drawings:

A’s withdrawal at the beginning of every month = 2,000 p.m. Therefore, total drawings of the year=
Rs.24,000.
It means 1st withdrawal has made on 01-04-2016
So, Time left from 1-4-2016 to 1-3-17 is 12 Months
And last withdrawal has made on 1-3-2017
So, Time left from 1-3-2017 to 31-3-2017 is 1 month.
Now, put this time period in the formula

12 + 1
Period =
2
13
Period =
2
Period = 6.5
Total Drawings = 24,000

10 6.5
Interest on Drawing = 24,000 X X
100 12
Interest on Drawing = 1300/-
2. Drawings in the middle of every month

A’s withdrawal at the middle of every month = 2,000 p.m. Therefore, total drawings of the year=
Rs.24,000.
So, Time left from 15-4-2016 to 1-3-17 is 11 months and 15 days. = 11.5 months
So, Time left from 15-3-2017 to 31-3-2017 is 15 days = 0.5 month
Now, put this time period in the formula:
11.5 + 0.5
Period =
2
12
Period =
2
Period = 6

6 6
100 12
3. Drawings at the end of every month

A’s withdrawal at the end of every month = 2,000 p.m. Therefore, total drawings of the year=
Rs.24,000.
So, Time left from 31-4-2016 to 31-3-17 in 11 Months
So, Time left from 31-3-2017 to 31-3-2017 is 0 months.
11.5 + 0
Period =
2
11
Period =
2
Period = 5
6 5.5
100 12
Interest on Drawing = 1,100/-
The solution of Question 30 Chapter 2 of +2 Part-1

:–
Calculation of Interest on Partner’s Drawing by Product Method
We will do it with the product method because of partner withdrawal a different amount every time.
Amount
Period Left after Product
Date (A)
(B) (C=A*B)
April 30 2,000 11 22,000
July 1 5,000 9 45,000
October 31 4,000 5 20,000
March 1 3,000 1 3,000
March 31 2000 0 0
Sum of Product 90,000
Interest on Drawing = Sum of Product X Rate of Interest X 1/12

10 1
100 12

31. (One partner’s interest is calculated for one year and other partners’ for half year) A and B and C are
partners in 3:2:1. They made the drawings as follows:
Calculate interest on A’s drawings for the year 2016-17 assuming drawings are made
A : Rs.2,000 p.m. in the middle of each month during the year.
B : Rs.3,000 p.m. on the first day of every month for only 6 months.
C : Rs.4,000 p.m. on the last day of every month for only 6 months. Interest in case of B and C is to be
calculated for six months.
The rate of interest is 6% p.a.
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o The solution of Question 31 Chapter 2 of +2 Part-1: –
 Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution
 Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution
The solution of Question 31 Chapter 2 of +2 Part-1: –

If partners withdrawal the same amount of drawing on a regular basis then we can calculate the interest on
drawing with help of following formula: –
Period =
2
A: Rs.2,000 p.m. in the middle of each month during the year:

A’s withdrawal at the middle of every month = 2,000 p.m. Therefore, total drawings of the year= Rs.24,000.
It means 1st withdrawal has made on 15-04-20.
So, Time left from 15-4-20.. to 1-3-20.. is 11 months and 15 days. = 11.5 months
And last withdrawal has made on 15-3-20.
So, Time left from 15-3-20.. to 31-3-20. is 15 days = 0.5 month

11.5 + 0.5
Period =
2
Period = 12
2
Period = 6
Total Drawings = 2,000*12=24,000

6 6
100 12
B: Rs.3,000 p.m. on the first day of every month for only 6 months.
B’s withdrawal at the beginning of every month = 3,000 p.m. Therefore, total drawings of the year= Rs.18,000.
So, Time left from 1-4-20… to 1-3-20… is 6 Months
So, Time left from 1-3-20… to 31-3-20… is 1 month.
6 +1
Period =
2
7
Period =
2
Period = 3.5
Total Drawings = 3,000*6 = 18,000

6 3.5
100 12
C: Rs.4,000 p.m. on the last day of every month for only 6 months.
A’s withdrawal at the end of every month = 4,000 p.m. Therefore, total drawings of the year= Rs.4,000*6 =
Rs.24,000
So, Time left from 31-4-20… to 31-9-20… is 5 Months
So, Time left from 31-9-20… to 31-9-20… is 0 month.
5 +0
Period =
2
5
Period =
2
Period = 2.5
6 2.5
100 12
300/-
Interest on Drawing =

32. (Interest on Drawings/ Different situations) Mr. X and Y started business on 1st Jan 2017 with
capitals of Rs.3,00,000 and 1,80,000 respectively. Calculate the interest on drawings of Mr. Y @10%
p.a. for the year ended 31st December, 2018 if he withdrew as follows:
(a) During the first three months, if he withdrew Rs.1,200 in the beginning of every month.
(b) During the next three months if he withdrew Rs.1,200 at the end of every month.
During the remaining months, he withdrew Rs.1,200 p.m.


If partners withdrawal the same amount of drawing on a regular basis then we can calculate the
interest on drawing with help of following formula: –
Period =
2
a) From 1st Jan to 1st March

Y’s withdrawal at the beginning for 3 months = 1,200 p.m. Therefore, total drawings = Rs.1200*3=
Rs. 3600.
So, Time left from 1-3-2017 to 31-3-2017 in 10 months.

12 + 10
Period =
2
22
Period =
2
Period = 11

10 11
100 12
2. From 30 April to 30 June

Y’s withdrawal at the end of every month = 1,200 p.m. Therefore, total drawings = Rs.1,200*3 =
Rs.3600.
So, Time left from 30-6-2017 to 31-3-2017 is 6 months.

8 + 6
Period =
2
14
Period =
2
Period = 7

10 7
100 12
c) Last six months

Y’s withdrawal for last 6 months = 1,200 p.m. Therefore, total drawings = Rs.1200*6= Rs. 7200.
10 3
100 12
Total interest on drawings = Rs. (330+210+180) = Rs.720

33. (Profit & Loss App. A/c / Current a/c/ Interest on Drawings) A B and C are partners with fixed
capitals of Rs.30,000. Rs.20,000 and Rs.10,000 respectively. They share profit and losses n the
ratio of 3:2:1. Interest on Drawings is to be charged at the rate of 10% p.a. The capitals are also to
be allowed interest @9% p.a.
The balance of current accounts on 1st Jan 2019 was A-Rs.16,000(Cr.), B- Rs.12,000(Cr.) and C-
Rs.800(Dr.) Their drawings during the year were A-Rs.1200; B-Rs.1,000 and C- Rs.800. The profit
of the year was Rs.17,130 before adjustment for interest as above.
Show the distribution of profit and draw up the capital and current accounts of the partners.
Profit and Loss Appropriation Account A/c
Particulars Particulars
Amount Amount
To Interest on capital – By Profit b/d 17,130
A 2,700 By interest on drawings:
B 1,800 A 108
C 900 5,400 B 90
C 72 270
To Net profit transferred to Capital a/cs
-A (1/2) 6,000
-B (1/3) 4,000
-C (1/6) 2,000 12,000
17,400 17,400
Partners’ Current Accounts
A B C A B C
To balance b/d – – 800 By Balance B/d 16,000 12,000 –
To Drawings A/c 1,200 1,000 800 By Interest on Capital A/c 2,700 1,800 900
To Interest on Drawings A/c 108 90 72 By net profit 6,000 4,000 2,000
16,710 1,228
To Balance c/d 23,392
27,700 17,800 2,900 27,700 17,800 2,900
35. (Interest on Laon/Different cases) Sad and Happy are partners in 2:1 ratio. On 1st April,2016
they gave loan of Rs.50,000 and Rs.40,000 to the firm. Show the distribution of profits in the
following cases for the year ended 31.3.2016 :
(a) Profit before interest Rs.6,900.
(b) Profit before interest Rs.4,500.
(c) Loss before interest Rs.600.

Case(a) : Profit before interest Rs.6,900
Profit and Loss Account A/c
Amount Amount
To Interest on the loan By Profit before interest 6,900
Sad (50,000*6%) 3,000
-Happy (50,000*6%) 2,400 5,400
-Sad’s Capital a/c (2/3) 1,000
-Happy’s Capital a/c (1/3) 500 1,500
6,900 6,900
Case(b) : Profit before interest Rs.4,500

Amount Amount
To Interest on the loan By Profit before interest 4,500
Sad (50,000*6%) 3,000
-Happy (50,000*6%) 2,400 5,400
By Loss transferred to:
-Sad’s Capital a/c (2/3) 600
-Happy’s Capital a/c(1/3) 300 900
5,400 5,400
Case(c) : Profit before interest Rs.600

Amount Amount
To loss before interest 600
To Interest on loan- 3,000
Sad (50,000*6%)
-Happy (50,000*6%) 2,400 5,400
By Loss transferred to:
-Sad’s Capital a/c (2/3) 4,000
-Happy’s Capital a/c(1/3) 2,000 6,000
6,000 6,000
36. (Profit & Loss App. A/c / Interest on Loan) A, B and C are partners in 6:3:1 ratio. They earned
profit Rs.96,000 before providing for interest on partners loan. A has given a loan of Rs.55,000 to the
firm at 10% p.a. on 1-4-2018, B has also given loan RS.20,000 on 1-1-19 a 10% p.a. It was decided
to transfer 20% of profits to general reserve before making any appropriations.
C’s Salaries is fixed at Rs.12,000 p.a. B gets salaries Rs.2,000 p.m. for the first five months
only.Profits Rs.20,000 are shared in the 6:3:1 and excess over Rs.20,000 is shared equally.
Prepare Profit and Loss Appropriation account for the year ended 31-3-19.

Amount Amount
By Profit b/d
To General Reserve (20% on 90,000) 18,000 (Rs.96,000-Interest on loan A
90,000
Rs.5,500 and B Rs.500 for months)
To C’s salary 12,000
To B’s salary (2000*5) 10,000
20,000 in 6:3:1 and 30,000 equally:
-A (12,000+10,000) 22,000
-B (6,000+10,000) 16,000
-C (2,000+10,000) 12,000 50,000
90,000 90,000
38. (Treatment of salary & commission) Fat and Thin are partners in a firm 3:2 ratio. Fat gets a
salary of Rs.5,000 p.m. and 10% commission on net profit before charging any commission. Thin is
to get 8% commission after charging all commission and salary. Net profit before charging salary
and commission was Rs.1,80,000.
Show the distribution of profits.


Amount Amount
By Profit & Loss a/c (profit for the

To Commission: 1,80,000
year)
– Fat @10% on (1,80,000-60,000) 12,000
– Thin @8% on 1,08,000
(i.e. (1,80,000-60,000-12,000*8/108) 8,000
To Salary – Fat 60,000
To Net profit transferred to:
-Fat (3/5) 60,000
-Thin (2/5) 40,000 1,00,000
1,80,000 1,80,000
39. (Treatment of salary & commission) X,Y and Z are in partnership sharing profits equally and
during the year 2018-19 earn a profit of Rs.1,15,000. X and Y are entitled to 10% on interest on their
capital of Rs.1,00,000 and Rs.1,50,000 respectively while Z, who has no capital in the firm is entitled
to a salary of Rs.10,000 p.a. Z is also entitled to commission of 6% on the profits charging Interest,
Salary and commission. Prepare profit and loss appropriation for the year ended 31st March 2019.


Amount Amount
To Interest on Capital : By net profit 1,15,000
–X 10000 25000
–Y 15000
To Z’s Salary 10000
To Commission Agents
6% on(1,15,000-35,000=80,000*6/106) 4528
To Net profit transferred to: 75,472

1,15,000 1,15,000

(Interest On Capital/Drawings & Profits Given) From The Following Balance Sheet of Rich and Poor, Calculate Interest On Capital @10% P.A. For The Year Ended 31-3-17

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Question 26 Chapter 2 of +2-Part-1

Liabilities Amount Assets Amount

Rich’s Capital 20,000 Sundry Assets 42,000

Poor’s Capital 16,000 Drawings – Rich 2,000

Profit & Loss Appropriation a/c (2016-17) 8,000

Calculation of Capital as on 1st April 2016

Capital as on 31st March 2017 20,000 16,000

Drawings during the year (Poor) – 5,000

Rich’s Drawings (3,000-2,000)(WN1) 1,000 –

Share in Profit (12,000-8,000)(WN2) (-2000) (-2000)

Capital as on 31st March 2016 19,000 19,000

Interest on Capital @10% p.a. 1,900 1,900

-Rupee 9,000 21,000

Less: Net Profit 16,800

Net Loss 4,200

Money’s Share of loss =2/3*4,200 i.e. Rs.2,800

-Rupee 9,000 21,000

Less: Net Profit 6,000

Net Loss 27,000

Money’s Share of loss =2/3*27,000 i.e. Rs.18,000

Calculation of interest on partner’s Drawings

1. Calculation of interest on Muthu’s Drawings:

Now, put this time period in the formula

Total Drawings = 24,000

Interest on Drawing = 1300/-

2. Drawings in the middle of every month

Total Drawings = 24,000

Interest on Drawing = 1200/-

3. Drawings at the end of every month

Interest on Drawing = 1,100/-

The solution of Question 30 Chapter 2 of +2 Part-1

April 30 2,000 11 22,000

July 1 5,000 9 45,000

October 31 4,000 5 20,000

March 1 3,000 1 3,000

Sum of Product 90,000

Interest on Drawing = Sum of Product X Rate of Interest X 1/12

Question 31 Chapter 2 of +2-Part-1

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The solution of Question 31 Chapter 2 of +2 Part-1: –

A: Rs.2,000 p.m. in the middle of each month during the year:

Now, put this time period in the formula

Total Drawings = 2,000*12=24,000

Interest on Drawing = 720/-

Total Drawings = 3,000*6 = 18,000

Question 32 Chapter 2 of +2-Part-1

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The solution of Question 32 Chapter 2 of +2 Part-1: –

a) From 1st Jan to 1st March

Now, put this time period in the formula

Total Drawings = 3,600

Interest on Drawing = 330/-

2. From 30 April to 30 June

Now, put this time period in the formula:

Total Drawings = 3,600

Interest on Drawing = 210/-

c) Last six months

Interest on Drawing = 180/-