Q.A partner, Arjun, withdrew ₹60,000 from the firm on 1st October 2023 for his personal use. The firm closes its books every year on 31st March. Calculate the interest on drawings to be charged to Arjun @8% p.a. for the year ended 31st March 2024.

Since this is a single, one-time withdrawal on a known date, interest is simply calculated for the exact number of months the money remained out of the firm until the books close. …

Step 1: Determine the period outstanding

Arjun withdrew ₹60,000 on 1st October 2023. The books close on 31st March 2024. The period for which this amount remained withdrawn from the firm is from 1st October 2023 to 31st March 2024 = 6 months.

Step 2: Apply the simple interest formula

Interest on Drawings = Amount Drawn × Rate/100 × Period (in months)/12 …

As a quick sanity check, work out the annual interest first and then take the proportion for the period: annual interest on ₹60,000 @8% = ₹4,800; since the amount was outstanding for exactly half the y …

A common mistake is counting the period from 1st April 2023 (the start of the accounting year) instead of from 1st October 2023, the actual date of withdrawal — interest on drawings is always calculated only for the period the money was actually o …