Question : Interest on capital is allowed on
Option 1: Opening capital
Option 2: The capital at the end of the year
Option 3: Average capital of the year
Option 4: the capital for the period capital remains invested in the business.
Answer (1)
19th Jan, 2024
Correct Answer: Opening capital
Solution :
Answer
Opening capital.
Interest on capital is always calculated as capital at the beginning of the year. Interest on capital refers to the return earned on the initial investment contributed by partners to the partnership firm. It is typically calculated based on the opening capital balance, providing partners with a reward for investing in the business at the outset.
Hence, the correct option is 1.
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