Raman, a partner withdrew ₹10,000 at the beginning of every month for the first 8 months, then ₹15,000 at the end of every month for the last 4 months. Calculate interest on drawings to be charged at 6% p.a. for the year ending March 31, 2023.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → ₹3,850
Interest on drawings runs from each withdrawal to the year end (31 March 2023). Using the product method:
₹10,000 at the beginning of April to November: months to year end = 12 + 11 + 10 + 9 + 8 + 7 + 6 + 5 = 68
Product = ₹10,000 × 68 = ₹6,80,000
₹15,000 at the end of December to March: months to year end = 3 + 2 + 1 + 0 = 6
Product = ₹15,000 × 6 = ₹90,000
Total product = ₹7,70,000
Interest = ₹7,70,000 × 6/100 × 1/12 = ₹3,850