The steps followed for calculating interest on drawing in the product method are.
(A) Calculate number of month for which interest is due on each drawing.
(B) List down amount of drawing in decending order in a table.
(C) Find the total of product and apply the formula to calculate interest on drawing.
(D) Calculate product for each drawing by multiplying amount and number of month.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (B), (A), (D), (C)
The product method is used when different amounts are withdrawn on different dates: each drawing is multiplied by the months it stays withdrawn, and interest is charged on the total of these products.
(B) List down amount of drawing in decending order in a table — first the drawings are set out in a table, so that each can be worked on.
(A) Calculate number of month for which interest is due on each drawing — the period runs from the date of each drawing to the last day of the accounting year.
(D) Calculate product for each drawing by multiplying amount and number of month — amount × months gives the product for each drawing.
(C) Find the total of product and apply the formula to calculate interest on drawing — interest = total of products × rate/100 × 1/12.
NCERT (2026-27 edition):
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