how can calculate interest on capital

3. Calculation of
Interest on Capital

4. Calculation of Interest on Capital
If the partnership deed is silent about the payment of
interest on capital, no interest allowed.
Interest on Capital is allowed, when it is specified in
Partnership Deed.
Interest is credited to Capital A/c at an agreed rate.

5. 4 cases are there;
Case – 1 - When there is no addition to or withdrawal from
capital during the year
Case-2 When there is additional capital contribution during
the accounting year
Case – 3 If opening balance of capital Account is not given
Case – 4 When there is withdrawal out of capital during the
year

6. Case – 1 - When there is no addition to or
withdrawal from capital during the year
Interest is calculated for whole year on the
opening capital
Interest on capital=Opening capital X Rate
Eg: Opening capital of Mr A Rs 50,000. Rate of interest 10%.
Calculate interest on capital
Interest on capital=50000 X 10/100=5000

7. Case-2 When there is additional capital contribution during
the accounting year
Interest on capital = For Opening capital ( Full year )+
For Additional capital ( On the date to the
end of the financial year)

8. Case – 3 If opening balance of capital Account is not given

9. Case – 4 When there is withdrawal out of capital during
the year
Interest on capital = On opening capital up to the date of
withdrawal +
On capital after withdrawing for the
remaining period.

10. EDU FACT
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