Question 5 of 50intermediate🔧 ApplyNumerical3 marks

Ram and Syam are partners sharing profits/losses equally. Ram withdrew Rs. 1,000 p.m. regularly on the first day of every month during the year 2015-16 for personal expenses. If interest on drawings is charged @ 5% p.a. Calculate interest on the drawings of Ram.

Correct Answer

Interest on Ram's Drawings: Rs. 325

Exercise: Do it Yourself | Q: 2 | (Page 26)
For More Understanding

Explanation

When a partner withdraws a fixed amount at the beginning of every month throughout the year, the interest on drawings is calculated using the average period method. Since withdrawals are made on the first day of each month, the money remains withdrawn for varying periods. The average period for beginning-of-month withdrawals is 6.5 months (calculated as: when money is withdrawn at the beginning of each month for 12 months, average period = (12+1)/2 = 6.5 months).

Solution Steps

  1. Step 1: Calculate Total Drawings = Rs. 1,000×12000 \times 12 months = Rs. 12,000

  2. Step 2: Determine Average Period (for withdrawals at the beginning of each month) = (12 + 1)/2 = 6.5 months

  3. Step 3: Calculate Interest on Drawings = Total Drawings × Rate × Average Period/12 = Rs. 12,000×5000 \times 5/100×6.5100 \times 6.5/12 = Rs. 12,000×0.05000 \times 0.05 × 6.5/12 = Rs. 325

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