Question

Nandini and Reva were partners in a firm sharing profits and losses in the ratio of 5 : 3. Nandini withdrew the following amounts from the firm for her personal use during the year ending 31st March 2025:

1. For the first five months, she withdrew ₹ 2,000 at the end of each month.
2. For the remaining months, she withdrew ₹ 3,000 at the beginning of each month.

Interest on drawings was to be charged @ 6% p.a. The books of the firm are closed on 31st March every year. Calculate interest on Nandini’s drawings for the year ending 31st March, 2025.

Answer 1

(i) First Five Months (April to August):

Total Drawings = `2,000 × 5`

= 10,000

Timing: End of each month.

Interest is charged from the date of each withdrawal until the end of the year (March 31)

Withdrawal (April 30) = Interest for 11 months.

Withdrawal (Aug 31) = Interest for 7 months.

Average Period = `("Months left after 1st drawing" + "Months left after last drawing")/2`

Average Period = `(11 + 7)/2`

= 9 months

Interest = `10,000 xx 6/100 xx 9/12`

= 450

(ii) Remaining Seven Months (September to March):

Total Drawings = 3,000 × 7

= 21,000

Timing: Beginning of each month.

Withdrawal (Sept 1): Interest for 7 months

Withdrawal (March 1): Interest for 1 month.

Average Period = `(7 + 1)/2`

= 4 months

Interest = `21,000 xx 6/100 xx 4/12`

= 420

Total Interest on Nandini’s Drawings:

Total Interest = 450 + 420

= 870