Question

19) Mahesh, a partner in firm withdrew the following amounts during the year ended March 31, 2018 May 10, 2017 10,000 September 30, 2017 8.000 November 01, 2017 7,000 January 31, 2018 12.000 Calculate interest on his drawings at 9% pa under product method.​

Answer 1

Given data: Mahesh withdrew the following amounts during the year -

• May 10, 2017 - Rs 10,000
• September 30, 2017 - Rs 8,000
• November 1, 2017 - Rs 7,000
• January 31, 2018 - Rs 12,000

The interest was charged at 9% p.a.

To find: The interest on drawings using the Product Method.

Answer:

In the product method, we multiply the amount withdrawn by the number of months left upto the ending month of the accounting period, i.e., 31st March 2018 in this case.

$\begin{array}{|c|c|c|c|}\cline{1-4}\bf Date & \bf Amount & \bf Number\ of\ months\ left & \bf Product\\\cline{1-4}\sf May\ 10 & 10,000 & 11 & 1,10,000\\\cline{1-4}\sf Sept\ 30 & 8,000 & 6 & 48,000\\\cline{1-4}\sf Nov\ 1 & 7,000 & 5 & 35,000\\\cline{1-4}\sf Jan\ 31 & 12,000 & 2 & 24,000\\\cline{1-4}\bf Total & \bf 37,000 & & \bf 2,17,000\\\cline{1-4}\end{array}$

Interest on drawings for one month = (Total product × Rate × 1) ÷ (100 × 12)

Interest on drawings = (Rs 2,17,000 × 9 × 1) ÷ (100 × 12)

Interest on drawings = Rs 19,53,000 ÷ 1200

Interest on drawings = Rs 1627.5

Therefore, the interest on drawings is Rs 1627.5.

Answer 2

Explanation:

Interest rate = 9% pa

Interest on Drawings = total sum of product ×(rate/100)× (1/12)

= 2,17,000 × (9/100) × (1/12)

= 542.5 × 3

= 1,627.5

Interest on Drawings =1,627.5

Hence, Interest on Drawings =1,627.5

See the attachment for detailed explanation.