Read the information carefully and answer the questions.
A partner withdrew money during the year ending March 31, 2020 from his capital account, for his personal use.
The amounts withdrawn were : ₹12,000 on June 01, 2019, ₹8,000; on August 31, 2019, ₹3,000; on September 30, 2019, ₹7,000, on November 30, 2019, and ₹6,000 on January 31, 2020.
Calculate interest on drawings, if the rate of interest is 9 percent per annum.
The total amount of interest on drawings will be:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 1,755
When different amounts are withdrawn on different dates, interest on drawings is charged on each amount for the period from the date of withdrawal to the end of the year (March 31, 2020 here), at 9% per annum.
Months from each date to March 31, 2020:
Rs. 12,000 on June 01, 2019: 10 months
Rs. 8,000 on August 31, 2019: 7 months
Rs. 3,000 on September 30, 2019: 6 months
Rs. 7,000 on November 30, 2019: 4 months
Rs. 6,000 on January 31, 2020: 2 months
Interest on each amount (amount × 9/100 × months/12):
Rs. 12,000 × 9/100 × 10/12 = Rs. 900
Rs. 8,000 × 9/100 × 7/12 = Rs. 420
Rs. 3,000 × 9/100 × 6/12 = Rs. 135
Rs. 7,000 × 9/100 × 4/12 = Rs. 210
Rs. 6,000 × 9/100 × 2/12 = Rs. 90
Total interest on drawings = Rs. 1,755
Shortcut: use the product method. Sum of products = 1,20,000 + 56,000 + 18,000 + 28,000 + 12,000 = Rs. 2,34,000 (rupee-months).
Interest = Rs. 2,34,000 × 9/100 × 1/12 = Rs. 1,755.
NCERT (2026-27 edition):
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