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Girish and Satish are partners in a firm. Their Capitals on April 1, 2018 were Rs. 5,60,000 and Rs. 4,75,000 respectively. On August 1, 2018 they decided that their Capitals should be Rs. 5,00,000 each. The necessary adjustment in the Capitals were made by introducing or withdrawing cash. Interest on Capital is allowed at 6% p.a. You are required to compute interest on Capital for the year ending March 31, 2019.

Solution:

Calculation of Interest on Capitals

Girish:
On Rs. 5,60,000 for 4 months = 5,60,000 * 6/100 * 4/12 = 11,200
On Rs. 5,00,000 for 8 months = 5,00,000 * 6/100 * 8/12 = 20,000
= 11,200 + 20,000 =  31,200


Satish:
On Rs. 4,75,000 for 4 months = 4,75,000 * 6/100 * 4/12 = 9,500
On Rs. 5,00,000 for 8 months = 5,00,000 * 6/100 *  8/12 = 20,000
= 9,500 + 20,000 = 29,500

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