Question

Radha and Rani are partners in a firm. Radha’s drawings for the year ending 31/3/2020 are given as under.
Rs 5000 on 1.6.2019 Rs 8000 on 30.9.2019
Rs 3000 on 31.12.2019 Rs 2000on 1.1.2020
Calculate the interest on Radha’s drawings at 10% for the year ending on 31.3.2020 under product method.​

Answer 1

ANSWER :

• ❖ If Radha and Rani are partners in a firm and Radha’s drawings for the year ending 31/ 3 /2020 are : Rs. 5,000 on 1. 6. 2019; Rs. 8,000 on 30. 9. 2019; Rs. 3,000 on 31. 12. 2019 and Rs. 2,000 on 1. 1. 2020; then the Interest on Radha's drawings @10% p.a. will be Rs. 942.

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SOLUTION :

❒ Given :-

• Radha's drawings are : Rs. 5,000 on 1. 6. 2019; Rs. 8,000 on 30. 9. 2019; Rs. 3,000 on 31. 12. 2019 and Rs, 2, 000 on 1. 1. 2020.

• Rate of interest = 10% p.a.

❒ To Calculate :-

• Interest on Drawings for the year ending on 31st March, 2020 = ?

❒ Method to be Used :-

• ✎ Product Method : Product Method is the method of calculating interest on drawings under which the amounts of drawings are multiplied by the period for which it remained withdrawn during the period and then the sum of all the individual products, i.e., Total Product. After that, the interest is calculated at the prescribed rate for one month by using the following formula :

★ Interest on Drawings = Sum of products × Rate of Interest p.a. × $\sf{\dfrac{1}{12}}$

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❒ Step 1 : Calculation of Sum of Product :-

• ➻ 1st June, 2019 : Rs. 5,000 for 10 months (Rs. 5,000 × 10) = Rs. 50,000

• ➻ 30th September, 2019 : Rs. 8,000 for 6 months (Rs. 8,000 × 6) = Rs. 48,000

• ➻ 31st December, 2019 : Rs. 3,000 for 3 months (Rs. 3000 × 3) = Rs. 9,000

• ➻ 1st January, 2020 : Rs. 2,000 for 3 month (Rs. 2,000 × 3) = Rs. 6,000

∴ Sum of Products = Rs. 50,000 + Rs. 48,000 + Rs. 9,000 + Rs. 6,000

➜ Sum of Products = Rs. 1,13,000

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❒ Step 2 : Calculation of Interest on Drawings :-

• ★ Interest on Drawings = Sum of products × Rate of Interest p.a. × $\sf{\dfrac{1}{12}}$

➨ Interest on Drawings = Rs. 1,13,000 × $\sf{\dfrac{10}{100}}$ × $\sf{\dfrac{1}{12}}$

➨ Interest on Drawings = Rs. 941.67

∴ Interest on Drawings = Rs. 942 (Balancing Figure)

• Hence, the interest on drawings is Rs 942.