Q.Partner T withdrew ₹10,000 on 1 May 2025, ₹15,000 on 1 August 2025, ₹5,000 on 1 December 2025, and ₹8,000 on 1 February 2026. The accounting year closes on 31 March 2026, and interest on drawings is charged at 8% per annum. Calculate the interest on drawings using the Product Method.

Since the drawings are of different amounts on irregular dates, each amount must be multiplied by its own outstanding period, and the products totalled before applying the rate.

Step 1 — Compute the number of months each drawing remained outstanding, up to 31 March 2026.

Step 2 — Compute the product for each drawing.

10,000 × 11 = 1,10,000

15,000 × 8 = 1,20,000

5,000 × 4 = 20,000

8,000 × 2 = 16,000

Step 3 — Sum of products. 1,10,000 + 1,20,000 + 20,000 + 16,000 = 2,66,000.

Step 4 — Apply the Product Method formula. Interest on Drawings = Sum of Products × Rate ÷ 100 × 1/12 = 2,66,000 × 8 ÷ 100 × 1/12 = 21,280 ÷ 12 = ₹1,773.33. …

Alternative method: compute interest on each individual drawing separately (Amount × Rate × Months outstanding ÷ 12) and add the four results — this is slower but is exact …

A common mistake is counting the months outstanding incorrectly — e.g., treating a drawing made on 1 May as outstanding for 12 months instead of 11 (May through March, inclusive of the drawing month, is 11 mont …