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Partnership Accounts—Fundamentals 1.7

Illustration 6 (Calculation of Opening Capital).
A and B are partners in a business and their capitals at the end of the year were ` 7,00,000
and ` 6,00,000 respectively. Calculate their opening capitals considering the following
information:

(a) Drawings of A and B for the year were ` 75,000 and ` 50,000 respectively.
(b) B introduced capital of ` 1,00,000 during the year.

(c) Interest on drawings debited to the Capital Accounts of A and B were ` 7,500 and
` 5,000 respectively.
(d) Share of loss debited to each Partner’s Capital Account was ` 20,000.

Solution:
CALCULATION OF OPENING CAPITAL

Particulars A B
` `

Capitals at the end 7,00,000 6,00,000
Add: Drawings during the year 75,000 50,000
Interest on Drawings 7,500 5,000
Share of Loss for the year 20,000 20,000
8,02,500 6,75,000
Less: Capital Introduced during the year ... 1,00,000
Opening Capitals or Capitals in the beginning 8,02,500 5,75,000

Alternatively, Capital Account of each partner may be prepared to determine Opening
Capitals as follows:

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.

Particulars A B Particulars A B
` ` ` `

To Drawings A/c 75,000 50,000 By Balance b/d 8,02,500 5,75,000
To Interest on Drawings A/c 7,500 5,000 (Balancing Figure)
To Profit and Loss A/c 20,000 20,000 By Cash/Bank A/c ... 1,00,000
(Share of Loss) (Add. Capital Introduced)
To Balance c/d (Given) 7,00,000 6,00,000
8,02,500 6,75,000 8,02,500 6,75,000