Question

In a Partnership, partners are charges
interest on drawings at 12% p.a. During the
year ended 31st December 1992, a partner
drew as follows:
Rs.
February 1 1,500
May 1 5,500
June 30 1,500
October 31 6,500
December31 2,000
What is the interest chargeable to the partner?

Answer 1

ANSWER :

• ❖ If in a Partnership, partners are charges interest on drawings at 12% p.a. During the year ended 31st December 1992, a partner's drawings on 1st February, 1992 is Rs. 1,500; drawings on 1st May, 1992 is Rs. 5,500; drawings on 30th July, 1992 is Rs. 1,500; drawings on 31st October, 1992 is Rs. 6,500 and drawings on 31st December, 1992 is Rs. 2,000; then the amount of Interest on Drawings chargeable to the partner will be Rs. 825.

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SOLUTION :

❒ Given :-

• Partners are charged interest on Drawings at 12% p.a.

• Drawings on 1st February, 1992 is Rs. 1,500.

• Drawings on 1st May, 1992 is Rs. 5,500.

• Drawings on 30th July, 1992 is Rs. 1,500.

• Drawings on 31st October, 1992 is Rs. 6,500.

• Drawings on 31st December, 1992 is Rs. 2,000.

❒ To Calculate :-

• Amount of Interest chargeable on Drawings to the partner = ?

❒ Formula :-

• ✎ Interest on Drawings is calculated on a particular amount in the given rate of Interest for a specified time period as under :

$\dag \: \: \underline{ \boxed{ \sf{ \: Interest \: \: on \: \: Drawings = Amount \times Rate \: \: of \: \: Interest \times Time \: }}}$

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❒ Calculation :-

Here,

• Amount withdrawn on 1st February, 1992 = Rs. 1,500

• Time = 11 months (From 1st February to 31st December)

• Rate of Interest = 12% p.a.

Using the formula of Interest on Drawings,

• ★ Interest on Drawings = Amount × Rate of Interest × Time

⇒ Interest on Drawings = $\sf{Rs. \: 1,500 \times 12 \: \% \times 11 \: months}$

⇒ Interest on Drawings =$\sf{Rs. \: 1,500 \times \dfrac{12}{100} \times \dfrac{11}{12}}$

⇒ Interest on Drawings = Rs. 165

Again,

• Amount withdrawn on 1st May, 1992 = Rs. 5,500

• Time = 8 months (From 1st May to 31st December)

• Rate of Interest = 12% p.a.

Using the formula of Interest on Drawings,

• ★ Interest on Drawings = Amount × Rate of Interest × Time

⇒ Interest on Drawings = $\sf{Rs. \: 5,500 \times 12 \: \% \times 8 \: months}$

⇒ Interest on Drawings =$\sf{Rs. \: 5,500 \times \dfrac{12}{100} \times \dfrac{8}{12}}$

⇒ Interest on Drawings = Rs. 440

Also,

• Amount withdrawn on 30th June, 1992 = Rs. 1,500

• Time = 6 months (From 30th June to 31st December)

• Rate of Interest = 12% p.a.

Using the formula of Interest on Drawings,

• ★ Interest on Drawings = Amount × Rate of Interest × Time

⇒ Interest on Drawings = $\sf{Rs. \: 1,500 \times 12 \: \% \times 6 \: months}$

⇒ Interest on Drawings =$\sf{Rs. \: 1,500 \times \dfrac{12}{100} \times \dfrac{6}{12}}$

⇒ Interest on Drawings = Rs. 90

Furthermore,

• Amount withdrawn on 31st October, 1992 = Rs. 6,500

• Time = 2 months (From 31st October to 31st December)

• Rate of Interest = 12% p.a.

Using the formula of Interest on Drawings,

• ★ Interest on Drawings = Amount × Rate of Interest × Time

⇒ Interest on Drawings = $\sf{Rs. \: 6,500 \times 12 \: \% \times 2 \: months}$

⇒ Interest on Drawings =$\sf{Rs. \: 6,500 \times \dfrac{12}{100} \times \dfrac{2}{12}}$

⇒ Interest on Drawings = Rs. 130

And,

• Amount withdrawn on 31st December, 1992 = Rs. 2,000

• Time = 0 months

• Rate of Interest = 12% p.a.

Using the formula of Interest on Drawings,

• ★ Interest on Drawings = Amount × Rate of Interest × Time

⇒ Interest on Drawings = $\sf{Rs. \: 2,000 \times 12 \: \% \times 0 \: months}$

⇒ Interest on Drawings = 0

(As Interest on Drawings is being calculated for the year ended 31st December, 1992 and the amount of Rs. 2,000 is withdrawn on the date of closing the accounts, i.e. on 31st December, 1992; hence no Interest on that amount will be chargable to the partner on for the year ended 31st December, 1992.)

Now,

• ✪ Total Amount of Interest on Drawings = Interest on Drawings on Rs. 1,500 + Interest on Drawings on Rs. 5,500 + Interest on Drawings on Rs. 1,500 + Interest on Drawings on Rs. 6,500

➨ Total Amount of Interest on Drawings = Rs. 165 + Rs. 440 + Rs. 90 + Rs. 130

∴ Total Amount of Interest on Drawings = Rs. 825