Q.A partner withdrew ₹20,000 at the end of every quarter during the year ended 31st March 2024. Calculate interest on drawings @5% p.a. using the average period method.

Quarterly drawings made at the end of each quarter carry a shorter average outstanding period than monthly drawings, since the last instalment of the year is drawn right on the closing date itself.

Step 1: Total drawings for the year

₹20,000 × 4 quarters = ₹80,000

Step 2: Average period outstanding

Since an equal amount is drawn at the end of every quarter throughout a full year, the standard average period is 4.5 months.

Step 3: Apply the Average Period (shortcut) Method

Interest on Drawings = Total Drawings × Rate/100 × Average Period (months)/12

= ₹80,000 × 5/100 × 4.5/12

= ₹80,000 × 0.05 × 0.375

= ₹1,500

Verification using the full Product Method

Full Product Method shown above as the verification working — the last quarter's drawing (31 March) is outstanding for 0 months since it coincides with the closing date, dragging the average down to 4.5 months, well below th …

Students often confuse this with the beginning-of-quarter case (7.5 months) or apply the monthly shortcut (5.5 months for end-of-month) by mistake — the average period depends jointly on the interval length (monthly vs quarterly) AND the timing with …