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Class 12 Accountancy Notes · GSEB

Reverse Calculation of Interest on Capital

Reverse Calculation of Interest on Capital — Solve the closing-capital sums of the GSEB Class 12 board exam with the opening-capital formula and a live solver. GSEB Class 12 Commerce Accountancy notes.

Last updated: 27 Sep 2026

Notes

What This Sum Asks

⭐ Golden ruleThe first line of every closing-capital sum

Interest on capital is always calculated on the opening balance of capital, not on the closing balance.

The question gives closing capital(after the year's drawings and profit effects) and asks for two answers: the opening capital and the interest on it. Reverse the year first, then charge the rate on that opening figure.

Steps to Solve

Step 1 — Recover opening capital
Opening capital = Closing capital + Drawings − Divisible profit
Add back what the partner took out; subtract the profit that was added during the year
Step 2 — Interest on capital
Interest on capital = Opening capital × Rate / 100
Full year unless the question gives a date

Sign rule

While reversing the year: plus drawings, minus profit.

Worked Board Sums

Solved Example

Problem

Sum 1 — Girish (textbook Illustration 10): closing capital ₹ 96,000 after giving effect of drawings ₹ 6,000 and divisible profit ₹ 9,000. Calculate 8% p.a. interest on capital.

Solution

Opening capital ₹ 93,000; Interest on capital ₹ 7,440

Solved Example

Problem

Sum 2 — Raghuvir: closing capital ₹ 80,000, including drawings of ₹ 12,500 and profit of ₹ 17,800. Interest at 6% p.a. on opening capital?

Solution

Opening capital ₹ 74,700; Interest on capital ₹ 4,482

Interactive Problem Solver

Enter closing capital, drawings, profit and rate — the solver reverses the year and charges interest on the opening balance, in the same two steps you will write in the exam.

Reverse Interest Solver — Opening = Closing + Drawings − Profit
Try your own closing-capital problem

Default = Girish (Illustration 10): closing ₹ 96,000, drawings ₹ 6,000, profit ₹ 9,000 at 8% → opening ₹ 93,000, interest ₹ 7,440. Type a negative profit for a loss.

Balance-flow strip — reverse the year, then charge interest

Closing capital₹ 96,000Drawings+ ₹ 6,000Profit− ₹ 9,000

Emerald = added back · rose = subtracted · amber = your two answers

Work through steps 1–2 in order — the same two steps you will write in the exam.

Key Takeaways

Key Takeaways

  • ⭐ Interest on capital is always computed on the opening capital.
  • Opening capital = Closing capital + Drawings − Divisible profit (plus drawings, minus profit).
  • Interest = Opening capital × rate/100 for the full year unless the question gives a date.
  • "After giving effect of drawings and profit" means the closing balance — reverse before charging interest.
  • If the interest looks wrong, re-check the reversal signs first.