Question

How do you calculate interest on capital in a partnership?

How do you calculate interest on capital in a partnership?

Homework Answers

Answer #1
  • Interest on Capital in a partnership is calculated as follow:

Interest on Capital = Capital balance x Rate of interest on capital as agreed.

  • The rate of interest on capital is agreed upon between partners.
  • Example:
    A and B forms a partnership and introduced capital of $ 200,000 and $ 100,000, respectively, sharing profit and losses equally.
    They also agreed for a 10% interest on capita on their original capital.

    In this case, the interest on Capital will be $ 20,000 [for ‘A’] and $ 10,000 [for ‘B’]
    200000 x 10% = 20000
    100000 x 10% = 10000
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