Question : Investment purchased during the year Rs 60,000 and interest on investment received Rs 1,000. 8% interest has accrued on Investment for five month. Calculate the amount credited to Income and Expenditure account and balance of investment at the end of the year.
Option 1: interest on investment credited to Income and Expenditure Account Rs 1,000 and closing balance of Investment is Rs 61,000
Option 2: interest on investment credited to Income and expenditure account Rs 3,000 and investment at the end of the year Rs 62,000
Option 3: Interest on investment credited to Income and Expenditure Account by Rs 2,000 and balance of investment at the end of the year Rs 60,000
Option 4: interest on investment credited to Income and Expenditure Account Rs 1,000 and Investment Balance at the end of the Year Rs 60,000
Correct Answer: interest on investment credited to Income and expenditure account Rs 3,000 and investment at the end of the year Rs 62,000
Solution :
Investment purchased during the year = Rs 60,000
(+) 8% interest due for five month =
Rs.2,000
(60,000 X 8% X 5/12)
Closing balance of investment =
Rs.62,000
Amount credited to I&E A/c = Rs.2,000 + Rs.1,000 = Rs.3,000.
Hence, the correct option is 2.
