When equal amounts are withdrawn in the beginning of each quarter throughout the year, then the Interest on drawings will be charged with the help of which formula?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Interest on Drawings = Total of drawings × Rate/100 × 7.5/12.
When equal amounts are withdrawn in the beginning of each quarter throughout the year:
Average period = (12+3)/2 = 7.5 months
Interest on Drawings = Total of drawings × Rate/100 × 7.5/12