Aashish withdrew Rs. 10,000 per month from the firm for his personal use during the year ending March 31, 2017. Calculate the interest on drawings, which is charged @8% p.a., when the amount is withdrawn at the beginning of each month-
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 5,200
When the same amount is drawn every month, interest on drawings is charged on the total drawings for the average period they stayed out of the firm. Money drawn at the beginning of each month is out for one month longer than money drawn at the end.
Total drawings = Rs. 10,000 × 12 = Rs. 1,20,000
Average period = (12 + 1) ÷ 2 = 6.5 months (the first drawing is out for 12 months, the last for 1)
Interest = Rs. 1,20,000 × 8% × 6.5/12 = Rs. 5,200
The average period changes with the timing of the drawings: 5.5 months for drawings at the end of each month (Rs. 4,400) and 6 months for drawings in the middle (Rs. 4,800). Reading the timing correctly is the whole question.
NCERT (2026-27 edition):
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