Target Exam

CUET

Subject

Accountancy Part A

Chapter

Accounting for Partnership

Question:

When the partners withdraw ............ amounts of money at different time intervals, the interest is calculated using the............ method.

Options:

Equal, Average

Unequal, average

Equal, capitalisation

Unequal, product

Correct Answer:

Unequal, product

Explanation:

The correct answer is option 4- Unequal, product.

  • When partners withdraw unequal amounts at different time intervals, we cannot directly calculate interest.
  • So, we use the product method, where each withdrawal is multiplied by the time period it remains outstanding.

 

NCERT" When the partners withdraw different amounts of money at different time intervals, the interest is calculated using the product method. Under the product method, for each withdrawal, the money withdrawn is multiplied by the period (usually expressed in months) for which it remained withdrawn during the financial year. The period is calculated from the date of the withdrawal to the last day of the accounting year. The products so calculated are totalled on the total of the products interest at the specified rate is calculated as under: "
Total of products × Rate × 1/12