Methods to calculate Interest on Drawings in Partnership Class 12
In the lecture, we will discuss the different methods to calculate Interest on Drawings in Partnership chapter class 12 as per the syllabus of the CBSE Board.
There are different formulas to calculate interest on drawings as per the given information.
I am sharing all possible ways to solve it.
1. Rules to calculate Interest on Drawings when fixed amounts are withdrawn each month at the beginning, middle, and at the end.
2. Rules to calculate Interest on Drawings when fixed amounts are withdrawn quarterly, at the beginning, middle, and at the end.
3. Rules to calculate Interest on Drawings when fixed amounts are withdrawn half-yearly, at the beginning, middle, and at the end.
4. Rules to calculate Interest on Drawings when fixed amounts are withdrawn each month during 1st 6 months, at the beginning, middle, and at the end.
5. Rules to calculate Interest on Drawings when fixed amounts are withdrawn each month during 1st 9 months, at the beginning, middle, and at the end.
6. When the rate of interest is given without the word ‘per annum’ interest will be charged without considering the time or date of the drawing. In other words, interest will be charged for 12 months.
7. when the date of drawings is not given, interest on drawings will be calculated for an average period, i.e., six months provided the rate of interest is given with the word per annum.
8. When a single drawing is made during the year & the date is also given, the rate of interest is given with the word p.a., rate of interest is calculated for the period the drawings are utilized by the partner.
9. When a single drawing is made during the year & the date is also given, the rate of interest is given without word p.a., rate of interest is calculated for 12 months.
10. When an unequal amount of is withdrawn at different dates the interest on drawings is calculated with the help of Simple Method or Product Method.
11. Simple Method:-
Under the method, interest on drawing is calculated separately on each amount of drawing from the date of drawing till the date of the accounting period, Interest on each amount of drawing is calculated with the help of the following formula:
12. Product Method:-
Under this method, first of all, the products are computed by multiplying each set of drawings by its duration. Thereafter, the different products are added and the interest is calculated on the total of production so arrived at for one month.
Illustration:-
Ravi is a partner of a firm. He withdrew the following amount during the year ended on 31st Dec 2001.
| February April June August October December | 1 30 30 31 1 31 | 8000 6000 9000 12000 8000 7000 |
Interest on Drawings is to be charged @9% p.a. Calculate Interest on Drawings.
Solutions:-
| Date | Amount | (months up to Dec. 31) | Interest @ 9% |
| February 1 April 30 June 30 August 31 October 1 December 31 | 8000 6000 9000 12000 8000 7000 | 11 8 6 4 3 0 | 88000 48000 54000 48000 24000 0 _________ 262000 |
