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CA Foundation · Accounting · Partnership and LLP Accounts

Meera and Nisha are partners. Meera withdrew ₹60,000 on 1 July during the year ended 31 March. Interest on drawings is charged at 10% p.a. What is the interest on Meera's drawings?

Interest on drawings is ₹4,500. The amount was withdrawn on 1 July, so it remains out of the business for nine months until 31 March, and interest is 60,000 multiplied by 10% and by 9/12.

  1. A₹4,500Correct
  2. B₹6,000
  3. C₹3,000
  4. D₹5,000

Explanation

From 1 July to 31 March is 9 months. Interest = 60,000 x 10% x 9/12 = ₹4,500. Using the full year gives ₹6,000, which ignores the period.

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