Raman, a partner withdrew ₹10,000 at the beginning of every month for the first 8 months, then ₹15,000 at 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 is charged for the time each drawing stays with the partner up to March 31, 2023.
First 8 drawings (beginning of April to beginning of November) = 8 × ₹10,000 = ₹80,000
Average period = (12 + 5) ÷ 2 = 8.5 months
Interest = ₹80,000 × 6% × 8.5/12 = ₹3,400
Last 4 drawings (end of December to end of March) = 4 × ₹15,000 = ₹60,000
Average period = (3 + 0) ÷ 2 = 1.5 months
Interest = ₹60,000 × 6% × 1.5/12 = ₹450
Total interest on drawings = ₹3,400 + ₹450 = ₹3,850