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how to calculate interest on capital
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how to calculate interest on capital Related: Maintenance of Capital ...
Interest on Capital and Interest on Drawing in Partnership Accounts
When rate of interest will be as agreed upon by the partners. Interest is charged on the opening balance of the partner’s capital account. When additional capital is introduced and some capital is withdrawn permanently, the interest will be calculated on the amount of the capital used in the business during a particular period. Interest is treated as an expense as it is a charge on the profits of the firm. The following journal entry will be made :
For Interest on Capital
Interest on Capital A/c Dr.
To Partner’s Capital A/c
(Being Crediting ‘Interest on Capital’ to Capital Account)
Interest can be calculated directly example simple interest is to be calculated by taking the principal amount, period and rate of interest or interest can be calculated by product method example by converting the principal amount into monthly products depending upon number of months for which principal amount remained in business. Then the interest is calculated by taking monthly rate of interest. The following example will illustrate both the methods of calculating interest on capital.
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how to calculate interest on capital Related: Maintenance of Capital Accounts of Partners-Fixed and Fluctuating Capital Method - Class 12, Account
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how to calculate interest on capital Related: Maintenance of Capital Accounts of Partners-Fixed and Fluctuating Capital Method - Class 12, Account for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about how to calculate interest on capital Related: Maintenance of Capital Accounts of Partners-Fixed and Fluctuating Capital Method - Class 12, Account covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for how to calculate interest on capital Related: Maintenance of Capital Accounts of Partners-Fixed and Fluctuating Capital Method - Class 12, Account.
how to calculate interest on capital Related: Maintenance of Capital Accounts of Partners-Fixed and Fluctuating Capital Method - Class 12, Account for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about how to calculate interest on capital Related: Maintenance of Capital Accounts of Partners-Fixed and Fluctuating Capital Method - Class 12, Account covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for how to calculate interest on capital Related: Maintenance of Capital Accounts of Partners-Fixed and Fluctuating Capital Method - Class 12, Account.
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