(a) Atul, Bajaj and Madan were partners in a firm sharing profits and losses in the ratio of 1 : 2 : 5. The pa

Question

Q. (a) Atul, Bajaj and Madan were partners in a firm sharing profits and losses in the ratio of 1 : 2 : 5. The partnership deed provides that interest on a partner's drawings shall be charged @ 18% per annum. During the year ended 31st March, 2025, Bajaj withdrew ₹ 7,000 at the end of each quarter. Interest on Bajaj's drawings will be : (A) ₹ 1,890 (B) ₹ 3,150 (C) ₹ 420 (D) ₹ 5,040

(OR)

(b) Damodar, Rao and Shridharan were partners in a firm sharing profits and losses in the ratio of 3 : 1 : 1. Their fixed capitals were ₹ 4,00,000; ₹ 3,00,000 and ₹ 2,00,000 respectively. Interest on capital is allowed at the rate of 6% per annum. Journal entry for allowing interest on Rao's capital will be : (A) Profit & Loss Appropriation A/c Dr. — Debit ₹ 18,000 | To Rao's Capital A/c — Credit ₹ 18,000 (B) Profit & Loss Appropriation A/c Dr. — Debit ₹ 18,000 | To Rao's Current A/c — Credit ₹ 18,000 (C) Interest on Capital A/c Dr. — Debit ₹ 18,000 | To Rao's Current A/c — Credit ₹ 18,000 (D) Interest on Capital A/c Dr. — Debit ₹ 18,000 | To Rao's Capital A/c — Credit ₹ 18,000

CBSECBSE Class XII Board 2026MCQ· 1mImportance★★★★★

✓ Free question

Concept understanding — Interest on Drawings

Interest on Drawings – A First Look

Think of a partnership firm as a shared pool of money. Each partner owns a part of that pool, but the firm needs that money to run its business. When a partner takes money out for personal use — buying a car, paying school fees, a holiday — that money is no longer available to the firm. The firm could have earned a return on that money if it had stayed in the business. So the partner is, in effect, borrowing from the firm.

Interest on Drawings is the charge the firm levies on a partner for that personal withdrawal. It compensates the firm for the loss of use of that capital.

The precise meaning

Drawings are any amounts or goods taken by a partner from the firm for personal use. Interest on Drawings is the interest charged by the firm on those drawings. It is an income for the firm and an expense for the partner.

The logic is simple: if the partner had left that money in the firm, the firm could have invested it and earned a return. By taking it out, the partner reduces the firm's capital base. Interest on Drawings restores some of that lost earning potential.

Why does it matter?

In a partnership, profits are shared according to an agreed ratio. But if one partner draws heavily and another draws little, the heavy drawer has effectively used more of the firm's resources. Without interest on drawings, that partner would unfairly benefit — the firm's profit would be lower because less capital was available, and all partners would share that reduced profit equally. Interest on drawings corrects this inequity.

It also encourages partners to withdraw only what they genuinely need, keeping more capital inside the firm for growth.

The accounting treatment

Interest on Drawings is recorded in two steps:

When interest is charged – The firm recognises it as income. The journal entry is:

Partner’s Capital Account (or Current Account) … Dr

To Interest on Drawings Account

The partner’s capital (or current) account is debited because the partner owes this amount to the firm. Interest on Drawings is credited because it is income for the firm.
At the end of the year – The Interest on Drawings Account is closed by transferring its balance to the Profit and Loss Appropriation Account:

Interest on Drawings Account … Dr

To Profit and Loss Appropriation Account

This increases the firm’s profit available for distribution.

Where does it appear in the final accounts?

Interest on Drawings appears in two places:

On the credit side of the Profit and Loss Appropriation Account – as an addition to the net profit.
On the debit side of the Partner’s Capital Account (or Current Account, if the firm maintains separate current accounts).

The NCERT textbook shows the following format for the Profit and Loss Appropriation Account:

Particulars	Amount (₹)	Particulars	Amount (₹)
To Net Profit (transferred)	xxx	By Net Profit (as per P&L)	xxx
To Interest on Capital	xxx	By Interest on Drawings	xxx
To Salary to Partner	xxx
To Commission to Partner	xxx
To Profit transferred to:
– A’s Capital A/c	xxx
– B’s Capital A/c	xxx
Total	xxx	Total	xxx

And in the Partner’s Capital Account (or Current Account), interest on drawings appears on the debit side:

Particulars	Amount (₹)	Particulars	Amount (₹)
To Interest on Drawings	xxx	By Balance b/d	xxx
To Drawings	xxx	By Interest on Capital	xxx
To Balance c/d	xxx	By Salary	xxx
		By Commission	xxx
Total	xxx	Total	xxx

The formula for calculating interest on drawings

The NCERT textbook gives the following formula:

Interest on Drawings = Amount of Drawings × Rate of Interest × Period/12

The period is the number of months for which the money was withdrawn. If drawings are made at the beginning of each month, the average period is 6.5 months. If at the end of each month, it is 5.5 months. If a single drawing is made during the year, the period is the time from the date of withdrawal to the end of the accounting year.

For example, if a partner withdraws ₹10,000 at the beginning of each month and the interest rate is 10% per annum, the total drawings for the year are ₹1,20,000. The average period is 6.5 months. So:

Interest on Drawings = 1,20,000 × 10/100 × 6.5/12 = ₹6,500

A common mistake to avoid

Students often confuse Interest on Drawings with Interest on Capital. Remember:

Interest on Capital is an expense for the firm and income for the partner.
Interest on Drawings is income for the firm and an expense for the partner.

They appear on opposite sides of the Profit and Loss Appropriation Account.

The key takeaway

Interest on Drawings is the firm’s way of saying: “If you take money out, you pay for the privilege.” It ensures fairness among partners and keeps the firm’s capital intact. In your exam, you will most often be asked to calculate it using the formula above and then show it in the Partner’s Capital Account and the Profit and Loss Appropriation Account.

Part (a): Interest on Bajaj's drawings = ₹1,890 (option A). Part (b): Interest on Rao's capital ₹18,000 debited to Interest on Capital A/c and credited to Rao's Current A/c (option C).

When a fixed amount is withdrawn at equal intervals, interest on drawings is found by the average period method.

Interest on Drawings = Total Drawings \times Rate \times (Average Period \div 12)

Working Note

Total drawings = 7,000 × 4 = ₹28,000.
Withdrawal at the end of each quarter: first drawing (30 Jun) has 9 months to run; last drawing (31 Mar) has 0 months. Average period = (9 + 0) ÷ 2 = 4.5 months.
Interest = 28,000 × 18/100 × 4.5/12 = 28,000 × 0.18 × 0.375 = ₹1,890.

✓Final answer

Part (a): Interest on Bajaj's drawings = ₹1,890 — option (A) .

Concept understanding — Partnership Capital Accounting

Partnership Capital Accounting — A First Look

Think of a partnership like a group of friends pooling money to start a roadside food stall. Each friend brings in some cash — that’s their capital. But unlike a simple piggy bank, a partnership needs a clear record of who put in how much, because profits (and losses) are shared in a fixed ratio, and partners may withdraw money, lend extra funds, or take a salary.

That record is what Partnership Capital Accounting is about.

What It Really Means

In accounting, capital is the amount a partner contributes to the firm. But it’s not just a one-time number. Over time, a partner’s capital changes due to:

Additional capital introduced
Drawings (money or goods taken out)
Share of profit or loss
Interest on capital, interest on drawings, partner’s salary, commission

The Capital Account of each partner tracks all these changes. It answers: What does the firm owe to this partner at any point?

Why It Matters

Without proper capital accounting, you cannot:

Determine each partner’s claim on the firm’s assets
Calculate interest on capital correctly
Prepare the Profit and Loss Appropriation Account
Settle accounts when a partner retires or dies

The NCERT textbook emphasises that capital accounts are personal accounts of the partners — they show the firm’s liability towards each partner.

Two Methods of Maintaining Capital Accounts

The NCERT Class 12 Accountancy textbook (Part II, Chapter 2) describes two methods:

1. Fixed Capital Method

Under this method, the capital account remains constant (except when additional capital is introduced or capital is withdrawn permanently). All other transactions — share of profit, drawings, interest, salary — are recorded in a separate Current Account.

Note

In the Fixed Capital Method, the Capital Account shows only the permanent capital. The Current Account shows the fluctuating balance.

2. Fluctuating Capital Method

Here, all transactions are recorded directly in the Capital Account. The capital balance changes every year.

Accounting Treatment — Which Account is Debited/Credited

Let’s take the most common entries. I’ll show the journal entry first, then explain.

Entry 1: Capital Introduced

When a partner brings in cash or assets:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Cash/Bank A/c	Dr.	xxx
	To Partner’s Capital A/c			xxx

Why? Cash comes in (asset increases — debit), and the firm’s liability to the partner increases (capital is a liability — credit).

Entry 2: Drawings

When a partner withdraws cash or goods for personal use:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Partner’s Capital/Current A/c	Dr.	xxx
	To Cash/Bank/Purchases A/c			xxx

Why? The firm’s liability to the partner decreases (debit the capital/current account), and cash or goods go out (credit).

Entry 3: Interest on Capital

This is an appropriation of profit. The formula (as per NCERT) is:

Interest on Capital = Capital × Rate of Time × Time (in months)/12

Journal entry:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Interest on Capital A/c	Dr.	xxx
	To Partner’s Capital/Current A/c			xxx

Then, at the end of the year, Interest on Capital is transferred to the Profit and Loss Appropriation Account:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Profit and Loss Appropriation A/c	Dr.	xxx
	To Interest on Capital A/c			xxx

Entry 4: Partner’s Salary

If the partnership deed allows a salary:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Salary to Partner A/c	Dr.	xxx
	To Partner’s Capital/Current A/c			xxx

Again, this is transferred to the Profit and Loss Appropriation Account.

Entry 5: Share of Profit

At the end of the year, after all appropriations, the remaining profit is distributed:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Profit and Loss Appropriation A/c	Dr.	xxx
	To Partner’s Capital/Current A/c			xxx

Formats as per NCERT

Format of Capital Account (Fluctuating Method)

Particulars	Amount (Rs)	Particulars	Amount (Rs)
To Drawings A/c	xxx	By Balance b/d	xxx
To Interest on Drawings A/c	xxx	By Cash/Bank (additional capital)	xxx
To Balance c/d	xxx	By Interest on Capital A/c	xxx
		By Salary to Partner A/c	xxx
		By Share of Profit A/c	xxx
Total	xxx	Total	xxx

Format of Capital and Current Accounts (Fixed Method)

Capital Account (remains fixed unless permanent change):

Particulars	Amount (Rs)	Particulars	Amount (Rs)
To Balance c/d	xxx	By Balance b/d	xxx
		By Cash/Bank (additional capital)	xxx
Total	xxx	Total	xxx

Current Account (records all other transactions):

Particulars	Amount (Rs)	Particulars	Amount (Rs)
To Drawings A/c	xxx	By Balance b/d	xxx
To Interest on Drawings A/c	xxx	By Interest on Capital A/c	xxx
To Balance c/d	xxx	By Salary to Partner A/c	xxx
		By Share of Profit A/c	xxx
Total	xxx	Total	xxx

A Common Mistake to Avoid

Watch out

Many students debit the Profit and Loss Account directly for interest on capital or partner’s salary. That is wrong. These are appropriations of profit, not expenses. They go to the Profit and Loss Appropriation Account, not the Profit and Loss Account.

The Big Picture

Partnership Capital Accounting is simply a way to keep track of what the firm owes each partner. The two methods — fixed and fluctuating — are just different ways of organising that record. The NCERT textbook uses both, and you need to be comfortable with both formats.

Start with the intuition: Every partner is both an owner and a creditor of the firm. The capital account shows the owner’s stake; the current account (if used) shows the temporary claims. Once you see that, the debits and credits fall into place.

Part (a): Interest on Bajaj's drawings = ₹1,890 (option A). Part (b): Interest on Rao's capital ₹18,000 debited to Interest on Capital A/c and credited to Rao's Current A/c (option C).

Interest on capital is an appropriation of profit. With fixed capitals, the capital account records only permanent capital changes, so every appropriation (interest on capital, salary, share of profit) is routed through the partner's Current Account.

Working Note — Interest on Rao's capital = ₹3,00,000 × 6% = ₹18,000.

Journal Entry

Particulars	Dr. (₹)	Cr. (₹)
Interest on Capital A/c Dr.	18,000
To Rao's Current A/c		18,000
(Interest allowed on Rao's fixed capital)

Watch out

With fixed capitals, credit the Current account, not the Capital account. Crediting Rao's Capital A/c (option D) would be correct only for fluctuating capitals.

✓Final answer

Part (b): (C) — Interest on Capital A/c Dr. ₹18,000; To Rao's Current A/c ₹18,000.

Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

Showing the 12 most recent of 98 on this concept.

CBSE 2026Set 67/3/11 markMCQ
$Q. When capitals of the partners are fluctuating, then the adjustments for drawings, interest on drawings, interest on capital, partners' salary, etc. are shown in the ________. (A) Current Account of partners (B) Capital Account of partners (C) Drawings Account (D) Profit and Loss Appropriation Account$
›Reveal solutionSolution
When capitals are fluctuating, all adjustments for drawings, interest, salary, etc. are recorded directly in the Capital Account of partners (Option B).

Concept First: Why the Capital Account Gets Everything

In partnership accounting, the treatment of partners' capital depends on whether the capital is fixed or fluctuating.

Fixed Capital Method: The capital account remains unchanged (except for additional capital introduced or permanent withdrawal). All other transactions — drawings, interest on drawings, interest on capital, salary, commission, and share of profit — are recorded in a separate Current Account. The capital account shows only the fixed amount.

Fluctuating Capital Method: There is no separate current account. Every single transaction affecting the partner — drawings, interest, salary, profit share, etc. — is recorded directly in the Capital Account. This means the capital account balance changes (fluctuates) every year.

Watch out

A common mistake is to think that drawings and interest on drawings go into a Drawings Account permanently. In the fluctuating method, the Drawings Account is merely a temporary account that is closed by transfer to the Capital Account at the end of the year. The final resting place is the Capital Account.

The Rule of Debit and Credit

The rule is simple: anything that increases the partner's claim on the firm (interest on capital, salary, commission, share of profit) is credited to the Capital Account. Anything that decreases the partner's claim (drawings, interest on drawings, share of loss) is debited to the Capital Account.

Why the Other Options Are Wrong

(A) Current Account of partners — This is used only in the fixed capital method. The question specifically says "when capitals of the partners are fluctuating," so a current account does not exist.

(C) Drawings Account — This is a temporary account. Drawings are first recorded here, but at the end of the accounting period, the Drawings Account is closed by transferring its balance to the Capital Account. The final adjustment is in the Capital Account, not the Drawings Account.

(D) Profit and Loss Appropriation Account — This account shows how the net profit is distributed among partners (salary, interest, profit share). It does not record the individual partners' drawings or interest on drawings. Those are personal accounts of the partners.

Tip

A quick way to remember: Fluctuating = Capital does everything. Fixed = Capital stays put, Current does the moving.

The Journal Entry Pattern

When a partner draws money, the entry is:

Debit: Drawings Account (temporary)

Credit: Bank/Cash

At year-end, the closing entry is:

Debit: Capital Account (of the partner)

Credit: Drawings Account

Similarly, interest on drawings is:

Debit: Capital Account

Credit: Interest on Drawings Account (which is then transferred to Profit and Loss Appropriation Account)

All these ultimately affect the Capital Account.

✓Final answer
$The correct answer is (B) Capital Account of partners . Under the fluctuating capital method, the Capital Account serves as the single repository for all adjustments — drawings, interest on drawings, interest on capital, partners' salary, and profit share — eliminating the need for a separate Current Account.$
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
$(C) 7.5 months$
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:

1st October, 2024 – withdrawal for 6 months (Oct to Mar)

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
$Interest on Arora's drawings for the year ended 31st March, 2025 is ₹2,700 . The correct answer is (B) ₹2,700 .$
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
$The period for interest on drawings is 5 1/2 months — option (B).$
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
$(b) 6 months.$
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
$(D) ₹ 1500.$
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
$Option (d) "5½ months" — equal monthly drawings made at the end of each month give an average period of (12 - 1)/2 = 5.5 months.$
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
$Option (b) "₹4,500" — interest on Rhea's half-yearly drawings of ₹30,000 each, at 10% p.a. for an average period of 9 months, is ₹4,500.$
CBSE 2026Set ANNUAL1 markMCQ
$Q. Which accounts are prepared by each partner in partnership under the fixed capital method of maintaining capital account ?$
(a) Partners Capital Account
(b) Partners Current Account
(c) Partners Capital Account and Partners Current Account
(d) Partners Capital Account or Partners Current Account
›Reveal solutionSolution

Under the fixed capital method, every partner maintains two accounts — a Capital Account (fixed) and a Current Account (fluctuating).

In a partnership firm, capital accounts can be maintained under two methods:

1. Fixed Capital Method — the capital account balance of each partner remains fixed from year to year, unless a partner introduces additional capital or withdraws part of the capital permanently. All other adjustments — interest on capital, interest on drawings, partner's salary/commission, share of profit or loss, and drawings — are routed through a separate Partners' Current Account, which fluctuates every year. This way the firm always knows, at a glance, exactly how much capital each partner has permanently invested.

2. Fluctuating Capital Method — only ONE account (the Capital Account itself) is maintained per partner, and every adjustment (interest, salary, drawings, share of profit/loss) is recorded directly in it, so its balance changes every year.

Since the question specifically asks about the fixed capital method, the accounts prepared are the Partners' Capital Account (fixed) and the Partners' Current Account (fluctuating).

✓Final answer
$Partners Capital Account AND Partners Current Account are both prepared under the fixed capital method.$
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
$Total interest on drawings = ₹11,700 (Total drawings ₹1,80,000 \times 12% \times 6.5/12 average months).$
CBSE 2025Set 67/5/11 markMCQ
$Q. There are two statements Assertion (A) and Reason (R) : Assertion (A) : The partners’ fixed capital accounts always show a credit balance, which shall remain the same (fixed) year after year unless there is any addition or withdrawal of capital. Reason (R) : When captials are fixed, then various items like share of profit or loss, interest on capital, drawings, interest on drawings, etc. are recorded in partners’ capital accounts. Choose the correct option from the following : (A) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is correct, but Reason (R) is incorrect. (D) Assertion (A) is incorrect, but Reason (R) is correct.$
›Reveal solutionSolution
Assertion (A) is correct because under the fixed capital method, capital accounts maintain a constant credit balance unless capital is introduced or permanently withdrawn. Reason (R) is incorrect because items like profit share, interest on capital, and drawings are recorded in partners' current accounts, not their capital accounts, when capitals are fixed.

Let's understand the fundamental difference between the Fixed Capital Method and the Fluctuating Capital Method in partnership accounting. This distinction is crucial for correctly treating various transactions related to partners.

Concept of Capital Accounts in a Partnership

A partnership firm maintains capital accounts for each partner to record their investment in the business. There are two primary methods for maintaining these accounts:

Fixed Capital Method: Under this method, the partners' capital accounts generally show a fixed balance year after year. This is because only two types of transactions affect the capital account:

Introduction of additional capital by a partner.

Permanent withdrawal of capital by a partner. All other adjustments, such as share of profit or loss, interest on capital, interest on drawings, salary, and commission, are recorded in a separate account called the Partners' Current Account. The logic here is to keep the initial capital investment distinct and stable, reflecting the long-term commitment of capital.

Fluctuating Capital Method: Under this method, only one account, the Partners' Capital Account, is maintained for each partner. All transactions related to partners – initial capital, additional capital, permanent withdrawals, share of profit or loss, interest on capital, interest on drawings, salary, and commission – are recorded directly in this single capital account. As a result, the balance of the capital account fluctuates from year to year.

Now, let's evaluate the given Assertion and Reason based on this understanding.

Evaluation of Assertion (A):

Assertion (A) states: "The partners’ fixed capital accounts always show a credit balance, which shall remain the same (fixed) year after year unless there is any addition or withdrawal of capital."

"The partners’ fixed capital accounts always show a credit balance": Capital is a liability for the firm and represents the partners' claim on the firm's assets. Therefore, capital accounts inherently have a credit balance. It is highly improbable for a capital account to show a debit balance, especially under the fixed capital method, as drawings and losses are routed through the current account.

"which shall remain the same (fixed) year after year unless there is any addition or withdrawal of capital": This is the defining characteristic of the fixed capital method. The very purpose of this method is to keep the capital balance constant, separating it from routine appropriations and drawings. Only direct changes to the capital invested (introduction or permanent withdrawal) alter this balance.

Therefore, Assertion (A) is correct.

Evaluation of Reason (R):

Reason (R) states: "When capitals are fixed, then various items like share of profit or loss, interest on capital, drawings, interest on drawings, etc. are recorded in partners’ capital accounts."

As explained above, when capitals are fixed, these items (share of profit or loss, interest on capital, drawings, interest on drawings, etc.) are not recorded in the Partners' Capital Accounts. Instead, they are recorded in the Partners' Current Accounts.

Recording these items in the capital accounts is characteristic of the Fluctuating Capital Method.

Therefore, Reason (R) is incorrect.

Conclusion:

Assertion (A) is correct, but Reason (R) is incorrect. This corresponds to option (C).

✓Final answer
$Assertion (A) is correct, but Reason (R) is incorrect. The correct option is (C) .$
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
$A partnership deed should be prepared as per (B) The Indian Partnership Act, 1932 .$

Date	Particulars	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)

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

Concept understanding — Interest on Drawings

Interest on Drawings – A First Look

The precise meaning

Why does it matter?

The accounting treatment

Where does it appear in the final accounts?

The formula for calculating interest on drawings

A common mistake to avoid

The key takeaway

Concept understanding — Partnership Capital Accounting

Partnership Capital Accounting — A First Look

What It Really Means

Why It Matters

Two Methods of Maintaining Capital Accounts

1. Fixed Capital Method

2. Fluctuating Capital Method

Accounting Treatment — Which Account is Debited/Credited

Entry 1: Capital Introduced

Entry 2: Drawings

Entry 3: Interest on Capital

Entry 4: Partner’s Salary

Entry 5: Share of Profit

Formats as per NCERT

Format of Capital Account (Fluctuating Method)

Format of Capital and Current Accounts (Fixed Method)

A Common Mistake to Avoid

The Big Picture

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