Question 6 of 50intermediate🔧 ApplyNumerical4 marks

Verma and Kaul are partners in a firm. The partnership agreement provides that interest on drawings should be charged @ 6% p.a. Verma withdraws Rs. 2,000 per month starting from April 01, 2019 to March 31, 2020. Kaul withdrew Rs. 3,000 per quarter, starting from April 01, 2019. Calculate interest on partner’s drawings.

Correct Answer

Interest on Verma's Drawings:

Total Drawings = Rs. 2,000×12000 \times 12 months = Rs. 24,000

Since dates of withdrawal are not specified, it is assumed that the amount was withdrawn evenly throughout the year. Hence, average period = 6 months.

Interest on Drawings = Rs. 24,000×6000 \times 6/100×6100 \times 6/12 = Rs. 720

Interest on Kaul's Drawings:

Total Drawings = Rs. 3,000×4000 \times 4 quarters = Rs. 12,000

Since dates of withdrawal are not specified, it is assumed that the amount was withdrawn evenly throughout the year. Hence, average period = 6 months.

Interest on Drawings = Rs. 12,000×6000 \times 6/100×6100 \times 6/12 = Rs. 360

Exercise: Do it Yourself | Q: 3 | (Page 26)
For More Understanding

Explanation

The textbook context clearly states that 'When Dates of Withdrawal are not specified', it is assumed that the amount was withdrawn evenly throughout the year, and the average period is taken as six months. For Verma, who withdraws Rs. 2,000 per month for 12 months, total drawings amount to Rs. 24,000. For Kaul, who withdraws Rs. 3,000 per quarter for 4 quarters, total drawings amount to Rs. 12,000. Applying the formula: Interest = Total Drawings × Rate × Average Period (6/12), we get Rs. 720 for Verma and Rs. 360 for Kaul.

Solution Steps

  1. Step 1: Calculate total drawings for Verma = Rs. 2,000×12000 \times 12 = Rs. 24,000

  2. Step 2: Apply interest formula for Verma = Rs. 24,000×6000 \times 6% × 6/12 = Rs. 720

  3. Step 3: Calculate total drawings for Kaul = Rs. 3,000×4000 \times 4 = Rs. 12,000

  4. Step 4: Apply interest formula for Kaul = Rs. 12,000×6000 \times 6% × 6/12 = Rs. 360

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