Q.John Ibrahim, a partner in Modern Tours and Travels withdrew money during the year ending March 31, 2020 from his capital account, for his personal use. Calculate interest on drawings in each of the following alternative situations, if rate of interest is 9 per cent per annum.

Showing the 12 most recent of 34 on this concept.

1. CBSE 2026Set 67/4/11 markMCQ
   Q.(a) Reena and Teena were partners in a firm sharing profits and losses in the ratio of 2 : 1. Teena withdrew ₹ 20,000 at the beginning of each month during the year ended 31st March, 2025. Interest on drawings was to be charged @ 6% per annum. Interest on Teena's drawings for the year ended 31st March, 2025 will be : (A) ₹ 7,800 (B) ₹ 7,200 (C) ₹ 9,600 (D) ₹ 6,600

   (OR)

   (b) Rohan and Sohan were partners in a firm sharing profits and losses equally. Rohan withdrew ₹ 15,000 at the beginning of each quarter during the year ended 31st March, 2025. Interest on Rohan's drawings will be calculated for an average period of : (A) 6 months (B) 4½ months (C) 7½ months (D) 6½ months

   ›Reveal solutionSolution

   Part (a): Interest on Teena's drawings = Rs.7,800 -> (A). Part (b): Average period for beginning-of-quarter drawings = 7.5 months -> (C).

   Part (a)

   Equal amount at the beginning of every month => average period 6.5 months.

   • Total drawings = 20,000 x 12 = Rs.2,40,000
   • Interest = 2,40,000 x 6% x 6.5/12 = Rs.7,800

   ✓Final answer

   (A) Rs.7,800

   Part (b)

   Equal amount at the beginning of each quarter stays for 12, 9, 6 and 3 months.

   • Average period = (12 + 9 + 6 + 3) / 4 = 30/4 = 7.5 months

   ✓Final answer

   (C) 7.5 months

2. CBSE 2026Set 67/5/11 markMCQ
   Q.Arora and Gurmeet were partners in a firm sharing profits and losses in the ratio of 3 : 2. Starting from 1st October, 2024 Arora withdrew ₹ 30,000 at the beginning of each quarter for his personal use. Interest on drawings was to be charged @ 12% per annum. Interest on Arora’s drawings for the year ended 31st March, 2025 was : (A) ₹ 1,800 (B) ₹ 2,700 (C) ₹ 450 (D) ₹ 3,600

   ›Reveal solutionSolution

   Interest on Arora's drawings for the year ended 31st March, 2025 is ₹2,700 (Option B).

   Concept: Interest on Drawings

   When a partner withdraws money from the firm for personal use, the firm loses the opportunity to earn on that capital. To compensate, interest on drawings is charged to the partner's capital account and credited to the Profit & Loss Appropriation Account (it is an income for the firm).

   The accounting treatment follows the rule:

   • Partner's Capital/Current A/c Dr. (reduces the partner's claim)
   • To Interest on Drawings A/c (or directly to P&L Appropriation A/c)

   When drawings are made at regular intervals (monthly, quarterly, etc.), we use the average period formula to calculate interest, rather than computing interest on each withdrawal separately.

   Understanding the Time Period

   Arora withdraws ₹30,000 at the beginning of each quarter starting 1st October, 2024 until the year-end 31st March, 2025. This financial year runs for 6 months (October 2024 to March 2025).

   The quarters in this period are:

   1. 1st October, 2024 – withdrawal for 6 months (Oct to Mar)
   2. 1st January, 2025 – withdrawal for 3 months (Jan to Mar)

   So only two withdrawals occur during the year.

   For equal periodic withdrawals, the average period formula is:

   $\text{Average Period} = \frac{\text{Total time period} + \text{Time of last withdrawal}}{2}$

   Here:

   • Total time period = 6 months (from first withdrawal on 1 Oct to year-end 31 Mar)
   • Time of last withdrawal = 3 months (from 1 Jan to 31 Mar)

   $\text{Average Period} = \frac{6 + 3}{2} = \frac{9}{2} = 4.5 \text{ months}$

   Tip

   When drawings are made at the beginning of each period, the average period is calculated from the first withdrawal date to year-end, then averaged with the last withdrawal period. This accounts for the fact that early withdrawals remain outside the firm longer.

   Solution

   Working Note 1: Calculation of Interest on Drawings

   Total drawings by Arora = ₹30,000 × 2 = ₹60,000

   Interest on drawings:

   $\text{Interest} = \text{Total Drawings} \times \frac{\text{Rate}}{100} \times \frac{\text{Average Period}}{12}$

   $= 60,000 \times \frac{12}{100} \times \frac{4.5}{12}$

   $= 60,000 \times 0.12 \times 0.375$

   $= 60,000 \times 0.045$

   $= ₹2,700$

   Journal Entry (at year-end 31st March, 2025):

   Date	Particulars	L.F.	Debit (₹)	Credit (₹)
   31-03-2025	Arora's Capital/Current A/c Dr.		2,700
   	To Interest on Drawings A/c			2,700
   	(Being interest charged on drawings)

   Watch out

   A common mistake is to calculate interest for the full year (12 months) or to assume four quarterly withdrawals. Since the financial year starts on 1st October, 2024 and ends on 31st March, 2025, only 6 months are covered, yielding just two withdrawals. Always count the actual withdrawals within the accounting period.

   ✓Final answer

   Interest on Arora's drawings for the year ended 31st March, 2025 is ₹2,700. The correct answer is (B) ₹2,700.

3. CBSE 2026Set ANNUAL1 markMCQ
   Q.If Asha makes drawings of ₹ 4,000 at the end of each months and interest on drawings is charged @ 8% per annum. The period for interest on drawings will be A) 7 1/2 months B) 5 1/2 months C) 6 1/2 months D) 4 1/2 months

   ›Reveal solutionSolution

   For equal monthly drawings made at the END of each month, the average period for interest on drawings is 5 1/2 months, so option (B) is correct. This is a standard RBSE Rajasthan / Class-12 Accountancy interest-on-drawings question.

   When a partner withdraws an equal amount at the end of every month for a full year, the first drawing stays invested (outstanding) for 11 months and the last drawing for 0 months. Using the average-period method:

   Average period = (period of first drawing + period of last drawing) / 2 = (11 + 0) / 2 = 5.5 months

   Equivalently, period = (n - 1) / 2 = (12 - 1) / 2 = 5.5 months, where n = 12 months. The interest rate (8% p.a.) and the amount (₹4,000) decide the interest figure, not the period.

   ✓Final answer

   The period for interest on drawings is 5 1/2 months — option (B).

4. CBSE 2026Set ANNUAL1 markMCQ
   Q.When time of withdrawals is not mentioned, interest on drawing is charged for

   (a) 5½ months

   (b) 6 months

   (c) 6½ months

   (d) 12 months

   ›Reveal solutionSolution

   If the time of drawings is not given, interest is charged for 6 months - option (b).

   When the amounts and dates of a partner's drawings are not specified, it is assumed that the drawings were spread evenly over the whole year. The average period for which the money remained withdrawn is therefore half the year, i.e. 6 months, and interest on drawings is charged for 6 months on the total drawings.

   ✓Final answer

   (b) 6 months.

5. CBSE 2026Set ANNUAL1 markMCQ
   Q.A partner withdrew ₹ 10,000 each on 1st January and 1st July. Interest on his drawings @ 10% p.a on 31st December, 2024 will be _______.

   (a) ₹ 500

   (b) ₹ 1000

   (c) ₹ 1250

   (d) ₹ 1500

   (a) ₹ 500

   (b) ₹ 1000

   (c) ₹ 1250

   (d) ₹ 1500

   ›Reveal solutionSolution

   Interest on drawings = ₹ 1,500 (Option D).

   Interest on drawings @10% p.a. is calculated separately on each withdrawal, from the date of withdrawal to the end of the accounting year (31st December, 2024):

   Drawing	Amount	Period outstanding (to 31 Dec)	Interest @10% p.a.
   1st January	₹10,000	12 months	₹10,000 × 10% × 12/12 = ₹1,000
   1st July	₹10,000	6 months	₹10,000 × 10% × 6/12 = ₹500
   Total			₹1,500

   Total interest on drawings = ₹1,000 + ₹500 = ₹1,500.

   ✓Final answer

   (D) ₹ 1500.

6. CBSE 2026Set ANNUAL1 markMCQ
   Q.Rita and Usha were partners in a firm sharing profits and losses in the ratio of 3 : 5. During the year, Usha withdrew ₹15,000 at the end of each month. Interest on drawings is to be charged @ 8% p.a. The average period for the calculation of interest on drawings will be

   (a) 4½ months

   (b) 6 months

   (c) 6½ months

   (d) 5½ months

   ›Reveal solutionSolution

   Drawings made at the end of every month carry an average period of 5½ months (not 6 or 6½), because the very last withdrawal (end of March) earns no interest at all.

   When interest on drawings is charged using the average period (product) method, the formula depends on exactly when during each period the partner withdraws money:

   • Drawings at the beginning of every month → average period = (12 + 1)/2 = 6½ months
   • Drawings at the middle of every month → average period = 6 months
   • Drawings at the end of every month → average period = (12 − 1)/2 = 5½ months

   Here, Usha withdrew ₹15,000 "at the end of each month." The first withdrawal (end of April, say) is outstanding for 11 months by the close of the accounting year (31st March); the last withdrawal (end of March) is outstanding for 0 months. The average of this evenly-spaced series (11, 10, 9, …, 1, 0) is (11+0)/2 = 5.5 months.

   This average period is then applied to the total annual drawings (12 × ₹15,000 = ₹1,80,000) at the given 8% p.a. rate to compute the actual interest (though the question only asks for the average period, not the rupee amount):

   Interest on Drawings = Total Drawings × Rate × Average Period/12 = 1,80,000 × 8% × 5.5/12 = ₹6,600 (for reference).

   ✓Final answer

   Option (d) "5½ months" — equal monthly drawings made at the end of each month give an average period of (12 − 1)/2 = 5.5 months.

7. CBSE 2026Set ANNUAL1 markMCQ
   Q.Or. Abha, Manju and Rhea were partners in a firm sharing profits and losses in the ratio of 3 : 3 : 4. During the year ended 31st March, 2024, Rhea withdrew ₹30,000 at the beginning of each half-year. Interest on Rhea's drawings @ 10% p.a. for the year ended 31st March, 2024 will be

   (a) ₹6,000

   (b) ₹4,500

   (c) ₹3,000

   (d) ₹1,500

   ›Reveal solutionSolution

   With two equal half-yearly drawings at the start of each half, interest works out to ₹4,500 using an average outstanding period of 9 months.

   Rhea withdrew ₹30,000 at the beginning of each half-year, i.e., twice during the year:

   • 1st withdrawal: 1st April, 2023 → outstanding for the full 12 months till 31st March, 2024
   • 2nd withdrawal: 1st October, 2023 → outstanding for 6 months till 31st March, 2024

   Average period = (12 + 6)/2 = 9 months

   Total drawings during the year = ₹30,000 × 2 = ₹60,000

   Interest on Drawings = Total Drawings × Rate × Average Period/12

   = ₹60,000 × 10% × 9/12

   = ₹60,000 × 0.10 × 0.75

   = ₹4,500

   (Equivalently, computing each withdrawal separately: 30,000×10%×12/12 = 3,000, plus 30,000×10%×6/12 = 1,500, total = 4,500 — the same answer, cross-checked.)

   ✓Final answer

   Option (b) "₹4,500" — interest on Rhea's half-yearly drawings of ₹30,000 each, at 10% p.a. for an average period of 9 months, is ₹4,500.

8. CBSE 2026Set ANNUAL1 mark
   Q.What is the total amount of interest on drawings of a partner if a partner withdraws ₹ 15,000 at the beginning of every month throughout the financial year at interest of 12% P.A. ?

   ›Reveal solutionSolution

   Interest on drawings (fixed monthly amount, drawn at the start of each month, for a full year) = ₹11,700.

   Step 1 — Total drawings for the year:

   Monthly drawings = ₹15,000

   Total drawings for 12 months = 15,000 × 12 = ₹1,80,000

   Step 2 — Find the average period for which the money was withdrawn:

   Since the partner withdraws the SAME amount at the BEGINNING of every month throughout the year, the average period for which the total drawings remain outstanding is:

   Average Period = (Time left after 1st drawing + Time left after last drawing) ÷ 2 = (12 + 1) ÷ 2 = 6.5 months

   (This is the standard shortcut for "same amount, same interval, drawn at the start of each period, for the full year.")

   Step 3 — Apply the interest formula:

   Interest on Drawings = Total Drawings × Rate × (Average Period ÷ 12)

   = 1,80,000 × 12% × (6.5 ÷ 12)

   = 1,80,000 × 0.12 × 0.5417

   = 21,600 × (6.5 ÷ 12)

   = 21,600 × 6.5 ÷ 12

   = 1,40,400 ÷ 12

   = ₹11,700

   This interest on drawings is a gain to the firm (and hence to all the partners collectively) — it is debited to the partner's Current/Capital Account and credited to the Profit and Loss Appropriation Account.

   ✓Final answer

   Total interest on drawings = ₹11,700 (Total drawings ₹1,80,000 × 12% × 6.5/12 average months).

9. CBSE 2025Set 67/5/11 markMCQ
   Q.Sudha, a partner withdrew ₹ 12,000 on 31st October, 2023 for her personal use. Interest on drawings is charged @ 6% p.a. The interest on Sudha’s drawings for the year ended 31st March, 2024 will be : (A) ₹ 300 (B) ₹ 30 (C) ₹ 3,000 (D) ₹ 150

   (OR)

   The partnership deed should be prepared as per the provisions of which of the following Acts ? (A) The Companies Act, 2013 (B) The Indian Partnership Act, 1932 (C) The Indian Stamp Act (D) The Cooperative Societies Act

   ›Reveal solutionSolution

   Part (a): Interest on drawings for 5 months = 12,000 × 6% × 5/12 = ₹300 (A).

   Part (b): A partnership deed is prepared under (B) The Indian Partnership Act, 1932.

   Part (a)

   Interest on drawings is charged for the time the withdrawn money stayed out of the firm — counted from the date of withdrawal to the year-end.

   • Amount withdrawn = ₹12,000
   • Date of withdrawal = 31 Oct 2023 → interest runs from 1 Nov 2023
   • Year-end = 31 Mar 2024 → period = 5 months
   • Rate = 6% p.a.

   Interest = 12,000 × 6/100 × 5/12 = 720 × 5/12 = ₹300

   Watch out

   Since the withdrawal was on 31 October, interest accrues only for the 5 remaining months (Nov–Mar), not 6.

   ✓Final answer

   Interest on Sudha's drawings for the year ended 31st March 2024 = ₹300 — option (A).

   Part (b)

   The partnership deed records the profit-sharing ratio, interest on capital/drawings, salaries, and other terms among partners. Being the constitutive document of a partnership, it is drawn up under the Indian Partnership Act, 1932, which defines partnership and governs partners' rights, duties, registration and dissolution.

   • (A) Companies Act, 2013 → governs companies, not partnerships.
   • (C) Indian Stamp Act → deals only with stamp duty on documents.
   • (D) Cooperative Societies Act → governs cooperative societies.

   ✓Final answer

   A partnership deed should be prepared as per (B) The Indian Partnership Act, 1932.

10. CBSE 2025Set 67/6/11 markMCQ
    Q.Ravi, Mohan and Vinod were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. The partnership deed provided that interest on partners' drawings will be charged @ 12% p.a. Starting from 1st July, 2023, Mohan withdrew ₹ 20,000 every month for his personal use. For the year ended 31st March, 2024 interest on Mohan's drawings will be charged for __________ months. (A) 6 1/2 (B) 6 (C) 5 1/2 (D) 5

    ›Reveal solutionSolution

    Interest on Mohan's drawings is charged for 5 months. He drew Rs 20,000 at the beginning of each month for 9 months (1 July 2023 to 1 March 2024), and the average period for equal beginning-of-month drawings over 9 months is (9 + 1) / 2 = 5 months.

    Concept First: Why the Period Matters

    Interest on drawings is a charge on the partner - it reduces his share of profit. Mohan draws Rs 20,000 on the 1st of every month starting 1 July 2023, and the year ends 31 March 2024. You cannot charge interest for the full year on each withdrawal, because each rupee was in Mohan's hands only from the date he drew it until the year-end. The earlier the drawing, the longer the money was out of the firm.

    For equal drawings made at the beginning of each month, interest is charged on the average period:

    • Beginning of each month, full year -> (12 + 1) / 2 = 6.5 months
    • End of each month, full year -> (12 - 1) / 2 = 5.5 months
    • Middle of each month, full year -> 6 months

    But here the drawings run for only 9 months (July to March), not the full year, so the average period must be recomputed for 9 drawings.

    The Correct Calculation

    Mohan draws Rs 20,000 on the 1st of each month from July 2023 to March 2024 - that is 9 drawings, total Rs 1,80,000. For each drawing, count the months from the date of drawing to 31 March 2024 (the first drawing is outstanding 9 months, the last 1 month):

    Month of Drawing	Amount (Rs)	Months to 31 Mar 2024	Product (Rs-months)
    1 Jul 2023	20,000	9	1,80,000
    1 Aug 2023	20,000	8	1,60,000
    1 Sep 2023	20,000	7	1,40,000
    1 Oct 2023	20,000	6	1,20,000
    1 Nov 2023	20,000	5	1,00,000
    1 Dec 2023	20,000	4	80,000
    1 Jan 2024	20,000	3	60,000
    1 Feb 2024	20,000	2	40,000
    1 Mar 2024	20,000	1	20,000
    Total	1,80,000		9,00,000

    Average period = Total product / Total drawings = 9,00,000 / 1,80,000 = 5 months.

    Tip

    Shortcut for equal beginning-of-month drawings made for only part of the year: average period = (months of first drawing + months of last drawing) / 2 = (9 + 1) / 2 = 5 months.

    Watch out

    Do not apply the full-year 6.5-month figure - the drawings ran only 9 months (July to March), so the average period is 5 months, not 6.5.

    ✓Final answer

    Interest on Mohan's drawings will be charged for 5 months - option (D).

11. CBSE 2025Set MARCH1 markMCQ
    Q.Viral withdraws ₹ 500 in the beginning of every month. If 10% p.a. interest is chargeable on drawing, determine interest on drawings.

    (a) ₹ 275

    (b) ₹ 300

    (c) ₹ 325

    (d) ₹ 350

    ›Reveal solutionSolution

    Total drawings = ₹500 × 12 = ₹6,000; withdrawn at the beginning of each month → average period 6.5 months; interest = 6,000 × 10% × 6.5/12 = ₹325. Correct option: (c) ₹325.

    This GSEB Class-12 Commerce numerical uses the average-period (product) method for interest on drawings.

    Step	Working	Amount
    Total drawings	₹500 × 12 months	₹6,000
    Average period (beginning of month)	(12 + 1) ÷ 2	6.5 months
    Interest on drawings	6,000 × 10/100 × 6.5/12	₹325

    When equal amounts are withdrawn at the beginning of every month, months of interest run from 12 (first) down to 1 (last), giving an average of 6.5 months.

    ✓Final answer

    (c) ₹ 325.

12. CBSE 2025Set ANNUAL1 markMCQ
    Q.For the firm, interest on partner's drawing is a/an (A) Expenditure (B) Income (C) Loss (D) Receipt

    ›Reveal solutionSolution

    Interest on drawings is charged on the amounts partners withdraw, so it flows into the firm; from the firm's side it is an income, credited to the Profit and Loss Appropriation Account. Hence the answer is (B) Income.

    For Bihar Class-12 (BSEB Inter) commerce candidates:

    • When a partner withdraws money for personal use, the firm charges interest on drawings to discourage excessive withdrawals.
    • This interest is a gain to the firm and a charge to the partner, so the entry is:
      • Partner's Capital/Current A/c Dr.
      • To Interest on Drawings A/c
    • Interest on drawings is credited to the Profit and Loss Appropriation Account, i.e. treated as income of the firm. (By contrast, interest on capital is an expense/appropriation for the firm.)

    Hence from the firm's point of view, interest on drawings is an income, option (B).

    ✓Final answer

    (B) Income.