Question

Calculate the interest on drawings of Mr. Aditya @ 8% p.a. for the year ended 31st March, 2025, in each of the following alternative cases:

Case:

1. If he withdrew ₹ 5,000 in the beginning of each quarter.
2. If he withdrew ₹ 6,000 at the end of each quarter.
3. If he withdrew ₹ 10,000 during the middle of each quarter.

Answer 1

i. ₹ 5,000 at the beginning of each quarter:

Total drawings = 5,000 × 4

= ₹ 20,000

Since drawings are made at the beginning of each quarter,

Average period = `(12 + 3)/2`

= `15/2`

= 7.5 months

Interest on drawings = `20,000 xx 8/100 xx 7.5/12`

= 20,000 × 0.08 × 0.625

= ₹ 1000

ii. ₹ 6,000 at the end of each quarter:

Total drawings = 6,000 × 4

= ₹ 24,000

Since drawings are made at the end of each quarter,

Average Period = `9/2`

= 4.5 months

Interest on drawings = `24,000 xx 8/100 xx 4.5/12`

= 24,000 × 0.08 × 0.375

= ₹ 720

iii. ₹ 10,000 in the middle of each quarter:

Total drawings = 10,000 × 4

= ₹ 40,000

Since drawings are made in the middle of each quarter,

Average Period = `12/2`

= 6 months

Interest on drawings = `40,000 xx 8/100 xx 6/12`

= 40,000 × 0.08 × 0.5

= ₹ 1,600