Amit and Bhola are partners in a firm. They share profits in the ratio of 3:2. As per their partnership agreement, interest on drawings is to be charged @ 10% p.a. Their drawings during 2019 were Rs. 24,000 and Rs. 16,000, respectively. Calculate interest on drawings based on the assumption that the amounts were withdrawn evenly, throughout the year.
Calculation of Interest on Drawings
When drawings are made evenly throughout the year, the average period is taken as 6 months.
Interest on Amit's Drawings: Total Drawings = Rs. 24,000 Interest = Drawings × Rate × Time = 24,//12 = Rs. 1,200
Interest on Bhola's Drawings: Total Drawings = Rs. 16,000 Interest = Drawings × Rate × Time = 16,//12 = Rs. 800
Explanation
The textbook context provides the final answers as Rs. 1,200 for Amit and Rs. 800 for Bhola. To achieve these figures using the provided data (Drawings: Rs. 24,000 and Rs. 16,000; Rate: 10%), the time period must be calculated as 6 months. This aligns with the standard accounting treatment where 'amounts withdrawn evenly throughout the year' are treated as if they were drawn in the middle of the year, resulting in an average period of 6 months.
Solution Steps
Step 1: Determine the Average Period. Since the amounts were withdrawn evenly throughout the year, the average period is 6 months.
Step 2: Calculate Interest on Amit's Drawings. Interest = 24,% × 6/12 = Rs. 1,200.
Step 3: Calculate Interest on Bhola's Drawings. Interest = 16,% × 6/12 = Rs. 800.