(a) Rohit, Ashish and Sameer entered into a partnership on 1st October, 2024 with capitals of ₹ 12,00,000; ₹ 6

Question

Q. (a) Rohit, Ashish and Sameer entered into a partnership on 1st October, 2024 with capitals of ₹ 12,00,000; ₹ 6,00,000 and ₹ 6,00,000 respectively. They decided to share the profits and losses in the ratio of 3 : 1 : 1. Partners were entitled to interest on capital @ 5% per annum as per the provisions of the partnership deed. Sameer was given a guarantee that his share of profit, after charging interest on capital, will not be less than ₹ 1,50,000 per annum. Any deficiency arising on that account shall be met by Rohit. The profit for the year ended 31st March, 2025 amounted to ₹ 5,60,000. Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2025.

(OR)

(b) Tara, Dev and Ishaan were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 1. The partnership deed provided for charging interest on drawings @ 10% p.a. The drawings of Tara, Dev and Ishaan during the year ending 31st March, 2025 amounted to ₹ 30,000; ₹ 18,000 and ₹ 12,000 respectively. After the final accounts were prepared, it was discovered that interest on drawings was not taken into consideration. Give necessary adjusting journal entry to correct the omission. Show your workings clearly.

CBSECBSE Class XII Board 2026Subjective· 3mImportance★★★★★

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Part (a)Concept understanding — Guarantee of Profit

Profit Appropriation Account – A First Look

Think of a partnership firm as a group of friends who run a business together. At the end of the year, they have earned some profit. But before they split that profit among themselves, they must first settle certain obligations: pay interest on the capital each partner contributed, give a salary to a partner who works full-time, or pay a commission to a partner who brought in a special client. Only after these items are accounted for can the remaining profit be divided.

That is exactly what the Profit Appropriation Account does. It is not a separate ledger account in the double-entry system — it is an extension of the Profit and Loss Account. The Profit and Loss Account shows the net profit (or net loss) of the firm. The Profit Appropriation Account shows how that net profit is appropriated (distributed or allocated) among the partners and to various reserves.

Why does it matter?

Without an appropriation account, you would not know:

How much interest on capital each partner is entitled to.
Whether a partner’s salary or commission has been paid.
How much profit is transferred to the General Reserve.
What remains to be shared as profit among the partners.

In short, it answers the question: “We made Rs 5,00,000 profit — now what happens to it?”

Accounting treatment – the logic

The Profit Appropriation Account is credited with the net profit brought forward from the Profit and Loss Account. Then, all appropriations (interest on capital, partner’s salary, partner’s commission, transfer to reserve) are debited to this account. The balance left after all debits is the divisible profit, which is then credited to the partners’ capital accounts in their profit-sharing ratio.

Important

The Profit Appropriation Account is not a real account — it is a nominal account. It is closed at the end of each year by transferring its balance to the partners’ capital accounts.

The format (as per NCERT Class 12)

Below is the standard proforma. Note that the left side (Dr.) shows all appropriations, and the right side (Cr.) shows the net profit brought in.

Dr.	Profit and Loss Appropriation Account	Cr.
Particulars	Amount (Rs)	Particulars
To Interest on Capital:		By Net Profit (transferred from P&L A/c)
– Partner A	XXX
– Partner B	XXX
To Partner’s Salary (if any)	XXX
To Partner’s Commission (if any)	XXX
To General Reserve	XXX
To Profit transferred to:
– Partner A’s Capital A/c	XXX
– Partner B’s Capital A/c	XXX
Total	XXX	Total

Part (b)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

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Part (a)

The firm began 1st Oct 2024, so the year covers 6 months. Interest on capital @ 5% p.a. and the ₹1,50,000 p.a. guarantee are both taken for 6 months.

Interest on Capital (6 months): Rohit 30,000, Ashish 15,000, Sameer 15,000 (Total 60,000)
Profit after interest = 5,60,000 − 60,000 = ₹5,00,000, shared 3:1:1 → Rohit 3,00,000, Ashish 1,00,000, Sameer 1,00,000
Guarantee check: ₹1,50,000 p.a. × 6/12 = ₹75,000. Sameer's ₹1,00,000 > ₹75,000 → no deficiency.

Profit and Loss Appropriation A/c for the year ended 31st March, 2025

Particulars	₹	Particulars	₹
To Interest on Capital:		By Profit & Loss A/c	5,60,000
Rohit 30,000
Ashish 15,000
Sameer 15,000	60,000
To Profit transferred:
Rohit 3,00,000
Ashish 1,00,000
Sameer 1,00,000	5,00,000

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Part (a): interest on capital ₹60,000; profit shared Rohit ₹3,00,000, Ashish ₹1,00,000, Sameer ₹1,00,000 — Sameer's ₹1,00,000 already beats his 6-month guarantee of ₹75,000, so no deficiency.

Part (b): the omitted interest on drawings is corrected by Ishaan's Capital A/c Dr ₹225; To Dev's Capital A/c ₹225.

Part (a)

The partnership was formed on 1st October 2024, so the accounting period to 31st March 2025 is only 6 months. Both interest on capital and the annual guarantee are proportioned for 6 months.

Working Note 1 — Interest on Capital @ 5% p.a. for 6 months:

Rohit 12,00,000 × 5% × 6/12 = ₹30,000
Ashish 6,00,000 × 5% × 6/12 = ₹15,000
Sameer 6,00,000 × 5% × 6/12 = ₹15,000 (Total ₹60,000)

Working Note 2 — Profit share: Profit after interest = 5,60,000 − 60,000 = ₹5,00,000, shared 3:1:1 → Rohit ₹3,00,000, Ashish ₹1,00,000, Sameer ₹1,00,000.

Working Note 3 — Guarantee check: Sameer's guarantee ₹1,50,000 p.a. for 6 months = ₹75,000. His actual share ₹1,00,000 exceeds ₹75,000, so no deficiency is borne by Rohit.

Profit and Loss Appropriation Account for the year ended 31st March, 2025

Particulars	₹	Particulars	₹
To Interest on Capital:		By Profit & Loss A/c (Net Profit)	5,60,000
Rohit 30,000
Ashish 15,000
Sameer 15,000	60,000
To Profit transferred to Capital A/cs:
Rohit 3,00,000
Ashish 1,00,000
Sameer 1,00,000	5,00,000

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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 44 on this concept.

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 …
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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:

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

…

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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 therefor …

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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

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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.

…
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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

…
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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 …

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CBSE 2025Set 67/5/11 markMCQ
$Q. John and Harry were partners in a firm sharing profits and losses in the ratio of 2 : 1. On 1st April, 2023, they admitted Dinesh as a new partner for 1/4th share in the profits of the firm with a guarantee that his share in the profits shall be at least ₹ 1,00,000. The net profit of the firm for the year ended 31st March, 2024 was ₹ 2,80,000. John’s share in the profits of the firm after giving the guaranteed amount of profit to Dinesh will be : (A) ₹ 1,40,000 (B) ₹ 1,20,000 (C) ₹ 1,00,000 (D) ₹ 70,000$
›Reveal solutionSolution
John's share after bearing the guarantee shortfall to Dinesh is ₹1,20,000.

Concept: Guarantee of Minimum Profit to a Partner

When an incoming partner is admitted with a guarantee of minimum profit, the firm promises that the new partner will receive at least a specified amount, regardless of what the profit-sharing ratio yields. If the new partner's share calculated by the agreed ratio falls short of the guaranteed amount, the deficiency must be borne by one or more of the existing partners.

The accounting treatment depends on who bears the guarantee. The question is silent on this point, which means we apply the default rule: the deficiency is borne by the old partners (here, John and Harry) in their old profit-sharing ratio. The new partner receives the guaranteed amount, and the remaining profit is distributed among all partners in the new ratio, but the old partners' shares are reduced to make up the shortfall.

The mechanics are straightforward:

Calculate Dinesh's share under the new profit-sharing ratio.

Compare it with the guaranteed amount.

If the calculated share is less, the deficiency is borne by John and Harry in their old ratio (2:1).

Adjust each partner's final share accordingly.

Determination of New Profit-Sharing Ratio

Dinesh is admitted for $\frac{1}{4}$ share. The remaining share for John and Harry together is:
$1 - \frac{1}{4} = \frac{3}{4}$
John and Harry continue to share this $\frac{3}{4}$ in their old ratio of 2:1.

John's new share:
$\frac{2}{3} \times \frac{3}{4} = \frac{2}{4} = \frac{1}{2}$
Harry's new share:
$\frac{1}{3} \times \frac{3}{4} = \frac{1}{4}$
New profit-sharing ratio = John : Harry : Dinesh = $\frac{1}{2} : \frac{1}{4} : \frac{1}{4}$ = 2 : 1 : 1.

Calculation of Profit Distribution

Working Note 1: Dinesh's share as per new ratio

Net profit for the year = ₹2,80,000

Dinesh's share = $\frac{1}{4} \times 2,80,000 = ₹70,000$

Working Note 2: Guarantee shortfall

Guaranteed amount to Dinesh = ₹1,00,000

Dinesh's share as per ratio = ₹70,000

Deficiency = ₹1,00,000 – ₹70,000 = ₹30,000

This deficiency of ₹30,000 must be borne by John and Harry in their old ratio of 2:1.

Working Note 3: Deficiency borne by old partners

John's share of deficiency = $\frac{2}{3} \times 30,000 = ₹20,000$

Harry's share of deficiency = $\frac{1}{3} \times 30,000 = ₹10,000$

Working Note 4: Final distribution of profit

| Partner | Share as per new ratio (2:1:1) | Adjustment for guarantee | Final share | …
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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 …
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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
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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

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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

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

Part (a)

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