Question

Shyam, Gopal and Arjun are partners carrying on a garment business. Shyam withdrew ₹ 10,000 in the beginning of each quarter. Gopal withdrew garments amounting to ₹ 15,000 to distribute it to flood victims, and Arjun withdrew ₹ 20,000 from his capital account. The partnership deed provides for interest on drawings @ 10% p.a. The interest on the drawing charged from Shyam, Gopal and Arjun at the end of the year will be:

Options

• Shyam – ₹ 4,800; Gopal – ₹ 1,500; Arjun – ₹ 2,000.

• Shyam – ₹ 2,500; Gopal – ₹ 1,500; Arjun – ₹ 1,000.

• Shyam – ₹ 2,500; Gopal – ₹ 750; Arjun – Nil.

• Shyam – ₹ 2,500; Gopal – Nil; Arjun – Nil.

Answer 1

Shyam – ₹ 2,500; Gopal – ₹ 750; Arjun – Nil.

Explanation:

1. Shyam withdrew ₹ 10,000 at the beginning of each quarter. The time the money stayed in the business is different for each withdrawal:

Shyam’s interest for 12 months = `10,000 xx 10/100`

= 1,000

Shyam’s interest for 9 months = `10,000 xx 10/100 xx 9/12`

= 750

Shyam’s interest for 6 months = `10,000 xx 10/100 xx 6/12`

= 500

Shyam’s interest for 3 months = `10,000 xx 10/100 xx 3/12`

= 250

Total interest for Shyam = 1,000 + 750 + 500 + 250

= 2,500

2. Shyam withdrew ₹ 15,000.

Interest on Drawing = `15,000 xx 10/100 xx 6/12`

= 750

3. Interest on Arjun’s withdrawal is nil because he withdrew from his capital account, which is a permanent reduction of capital and not a drawing against profits for which interest is typically charged.