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Interest calucated on capitals

obalreddy (accountant) (282 Points)

11 May 2011

Dear sir

How to caluclated the interest on captals please clarified my doute

for the year 2010-2011, captal amount 5,25,000/-

goreddy

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3 Replies

Suresh Prasad (www.aubsp.com) (15630 Points)
Replied 11 May 2011

This may help you .......!!!!!!!!!!!!!!!

The capital account balance considered for calculation of interest on capital is dependent on the method adopted for maintaining the capital accounts.

Fixed Capital Accounts
Where the Capital Accounts are being maintained under "Fixed Capital Accounts" method, interest on capital is to be paid on the balances in the capital accounts. Interest on Current account balances is not considered unless there is a specific instruction regarding the same.
Fluctuating Capital Accounts
Where the Capital Accounts are being maintained under "Fluctuating Capital Accounts" method, interest on capital is to be paid on the balances in the capital accounts as that is the only account that is related to capital.

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Suresh Prasad (www.aubsp.com) (15630 Points)
Replied 11 May 2011

As per Sec 40(b)(iv ): any payment of interest to any partner which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as such amount exceeds the amount calculated at the rate of 12% simple interest per annum.