Question

Calculate interest on drawings, if owner withdrew the following amounts as follows Jan.31 Rs. 6,000, Mar.31 Rs.4,000, July 1 Rs.8,000, Sep. 30 Rs.3,000, 1 Nov, Rs.5,000. Accounts are closed on 31st December every year and rate of interest on drawings is 10% p.a. a. ₹1,418.33 b. ₹1,408.33 c. ₹1,418.93 d. ₹1,408.9​

Answer 1

Given: Drawings were made on the following dates -

• Jan, 31 - Rs 6,000
• Mar, 31 - Rs 4,000
• July, 1 - Rs 8,000
• Sept, 30 - Rs 3,000
• Nov, 1 - Rs 5,000

The rate of interest on drawings is 10% p.a.

To find: The interest on drawings.

Answer:

When irregular amounts are withdrawn at irregular intervals, the product method is used.

$\begin{array}{|c|c|c|c|}\cline{1-4}\bf Date & \bf Amount & \bf Number\ of\ months & \bf Product\\\cline{1-4}\sf Jan\ 31 & 6,000 & 11 & 66,000\\\cline{1-4}\sf Mar\ 31 & 4,000 & 9 & 36,000\\\cline{1-4}\sf July\ 1 & 8,000 & 6 & 48,000\\\cline{1-4}\sf Sept\ 30 & 3,000 & 3 & 9,000\\\cline{1-4}\sf Nov\ 1 & 5,000 & 2 & 10,000\\\cline{1-4}\bf Total & \bf 62,000 & & \bf 1,69,000\\\cline{1-4}\end{array}$

Interest on drawings for one month = (Total product × 10 × 1) ÷ (100 × 12)

Interest on drawings for one month = (Rs 1,69,000 × 10 × 1) ÷ (100 × 12)

Interest on drawings for one month = Rs 1,408.33

Therefore, the interest on drawings is (B) Rs 1,408.33.