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Question
How will you calculate interest on the drawings of equal amounts on the first day of every month of a calendar year?
Short Answer
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Solution
When equal amounts are withdrawn on the first day of every month during a calendar year, interest on drawings is calculated by the average period method.
In this case, the average period is taken as 6.5 months.
The interest on drawings is calculated using the formula:
Interest on drawings = `"Total drawings" xx "Rate of interest" xx 6.5/12`
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