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(Interest on capital) C and D have capitals of rs 70000 and rs 90000 on 1st april,2015.C made an addition of rs 40000 to his capital on 1st october, 2015 Interest is allowed @ 10% p.a. on the capital.Pass journal entry for interest on capital for the year ended 31st March, 2016?
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(Interest on capital) C and D have capitals of rs 70000 and rs 90000 o...
Journal Entry for Interest on Capital
The journal entry for interest on capital for the year ended 31st March, 2016 can be recorded as follows:
Date | Particulars | Debit | Credit
---|---|---|---
31st March, 2016 | C's Capital A/c | Rs 7,700 |
31st March, 2016 | D's Capital A/c | Rs 9,900 |
31st March, 2016 | Interest on Capital A/c | Rs 6,400 |
| | | Total | Rs 23,000
Explanation
The interest on capital for the year ended 31st March, 2016 is calculated by multiplying the capital with the rate of interest. In this case, the capitals of C and D are Rs 70,000 and Rs 90,000 respectively. C made an addition of Rs 40,000 to his capital on 1st October, 2015. The interest is allowed at the rate of 10% p.a. on the capital.
Therefore, the interest on capital for the year ended 31st March, 2016 can be calculated as follows:
Interest on C's capital = (Rs 70,000 + Rs 40,000) x 10% = Rs 11,000
Interest on D's capital = Rs 90,000 x 10% = Rs 9,000
Total interest on capital = Rs 11,000 + Rs 9,000 = Rs 20,000
The interest on capital is credited to the Interest on Capital A/c and debited to the respective capital accounts of C and D. The final journal entry is as shown above.
Conclusion
Interest on capital is the amount paid by the firm to the partners on their capital investment. It is calculated by multiplying the capital with the rate of interest. The journal entry for interest on capital is passed at the end of the accounting period.
The journal entry for interest on capital for the year ended 31st March, 2016 can be recorded as follows:
Date | Particulars | Debit | Credit
---|---|---|---
31st March, 2016 | C's Capital A/c | Rs 7,700 |
31st March, 2016 | D's Capital A/c | Rs 9,900 |
31st March, 2016 | Interest on Capital A/c | Rs 6,400 |
| | | Total | Rs 23,000
Explanation
The interest on capital for the year ended 31st March, 2016 is calculated by multiplying the capital with the rate of interest. In this case, the capitals of C and D are Rs 70,000 and Rs 90,000 respectively. C made an addition of Rs 40,000 to his capital on 1st October, 2015. The interest is allowed at the rate of 10% p.a. on the capital.
Therefore, the interest on capital for the year ended 31st March, 2016 can be calculated as follows:
Interest on C's capital = (Rs 70,000 + Rs 40,000) x 10% = Rs 11,000
Interest on D's capital = Rs 90,000 x 10% = Rs 9,000
Total interest on capital = Rs 11,000 + Rs 9,000 = Rs 20,000
The interest on capital is credited to the Interest on Capital A/c and debited to the respective capital accounts of C and D. The final journal entry is as shown above.
Conclusion
Interest on capital is the amount paid by the firm to the partners on their capital investment. It is calculated by multiplying the capital with the rate of interest. The journal entry for interest on capital is passed at the end of the accounting period.
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(Interest on capital) C and D have capitals of rs 70000 and rs 90000 on 1st april,2015.C made an addition of rs 40000 to his capital on 1st october, 2015 Interest is allowed @ 10% p.a. on the capital.Pass journal entry for interest on capital for the year ended 31st March, 2016?
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