Calculate Interest on drawings of Mr. Vishal @ 5%p.a. for the year ended 31st March 2020,
in each of the following alternative cases:
Case 1. If his drawings during the year were Rs. 30,000.
Case 2. If he withdraws Rs. 2,500 per month during the year.
Answers
Given: The rate of interest on drawings for Mr Vishal is 5% p.a.
To find: The interest on drawings for the two cases mentioned.
Answer:
Case 1: When the total drawings during the year is Rs 30,000.
Since the amount has been given for the full year, there isn't a need to perform additional calculations. Simply multiply the rate and the drawings.
Interest on drawings = Rate × Total drawings
Interest on drawings = 5/100 × Rs 30,000
Interest on drawings = Rs 1,50,000/100
Interest on drawings = Rs 1,500
Therefore, the interest on drawings for case 1 is Rs 1,500.
Case 2: When he withdraws Rs 2,500 per month during the year.
It hasn't been specified at what time of each month [i.e., at the beginning/in the middle/at the end of each month] the drawings were made. Since no specific time has been mentioned, multiple the amount by 12 and further multiply it with the rate.
Total drawings for the year = Rs 2,500 × 12 = Rs 30,000
Interest on drawings = Rate × Total drawings
Interest on drawings = 5/100 × Rs 30,000
Interest on drawings = Rs 1,50,000/100
Interest on drawings = Rs 1,500
Therefore, the interest on drawings for case 2 is Rs 1,500.