From the following Balance sheet of Long and Short,

29 :- From the following balance sheet of long and short, calculate interest on capital @8% p.a. for the year ended 31st March, 2025.
During the year, Long withdrew Rs 40,000 and short withdrew Rs 50,000. Profit for the year was Rs 1,50,000 out of which Rs 1,00,000 was transferred to general reserve.

Solution:- Calculation of interest on capital

Long  opening capital = Closing capital – Additional capital + Drawings – Profit
= 1,20,000 – 0 + 40,000 – 25,000
=  Rs 1,35,000
Interest on capital = 1,35,000 x 8% x 12/12 = Rs 10,800
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Short opening capital = Closing capital – Additional capital + Drawings – Profit
= 1,40,000 – 0 + 50,000 – 25,000
 = Rs 1,65,000
Interest on capital = 1,65,000 x 8% x 12/12 = Rs 13,200