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CMA Intermediate · Financial Accounting · Death of Partner

A firm closes its books on 31 March. Partner X, who dies on 30 June, withdrew Rs 6,000 at the beginning of each month from April. The partnership deed charges interest on drawings at 8% p.a. What is the interest on X's drawings up to the date of death?

Interest on drawings is Rs 240. Drawings made at the start of each month are outstanding for 3, 2 and 1 months, which is 6 months of Rs 6,000. Interest is Rs 36,000 x 8% x 1/12 = Rs 240.

  1. ARs 240Correct
  2. BRs 360
  3. CRs 180
  4. DRs 120

Explanation

Drawings were made at the start of April, May and June, so they remain outstanding for 3, 2 and 1 months. That gives 6 months of Rs 6,000 in total, or Rs 36,000 for one month. Interest is Rs 36,000 x 8% x 1/12 = Rs 240. Rs 360 wrongly charges three full months on all Rs 18,000.

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