A and B are partners sharing profits in a ratio of 5:4. They withdraw ₹4000 each at the end of each quarter. Interest will be charged @ 6%p.a. Calculate total amount of interest on drawings that is credited to the profit and loss appropriation account at the end of the year?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹720.
Total amount of drawings of A = ₹4000*4
= ₹16,000
Ist drawing = 30 June
Last drawing = 31 March
Average period for interest = (months left after ist drawings+ months left after last drawings)/2
= (9+0) months/2
= 4.5 months.
Interest on drawings of A = 16000*6/100*4.5/12
= ₹360
Since B also withdrew the same amount in the same pattern as A.
So, his interest on drawings is also the same i.e., ₹360.
So, the total amount of drawings that will be credited = ₹360+ ₹ 360
= ₹720