Select the conditions required for computing interest on drawings usi…

Select the conditions required for computing interest on drawings using average period method:

A. Equal amount of drawings
B. Fixed interval of drawings
C. Varying amounts of drawings
D. Different interval of drawings
E. Rate of Interest

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → A, B and E only

The average period short cut works only when the same amount is withdrawn at regular intervals; interest is then the total drawings × rate × average period.

(A) Equal amount of drawings — Correct. The same sum is withdrawn each time.

(B) Fixed interval of drawings — Correct. Withdrawals are made each month or each quarter.

(C) Varying amounts of drawings — Incorrect. Varying amounts need the product method.

(D) Different interval of drawings — Incorrect. Irregular dates also need the product method.

(E) Rate of Interest — Correct. Interest is charged at the rate agreed in the deed.

NCERT (2026-27 edition):
When Fixed Amounts was Withdrawn Every Month – “… Many a time, a fixed amount of money is withdrawn by the partners, at equal time interval, say each month or each quarter.”

NCERT (2026-27 edition):
Interest on Drawings – “The partnership agreement may also provide for charging of interest on money withdrawn out of the firm by the partners for their personal use. As stated earlier, no interest is charged on the drawings if there is no express agreement among the partners about it. However if the partnership deed so provides for it, the interest is charged at an agreed rate, for the period for which drawings have been made. Remained outstanding from the partners during an accounting year.”

NCERT (2026-27 edition):
When Varying Amounts are Withdrawn at Different Intervals – “… When the partners withdraw different amounts of money at different time intervals, the interest is calculated using the product method.”