A partner withdraws Rs. 12,000 at the beginning of each month. If the annual interest rate on drawings is 10%, what is the interest on drawings for the year?
Correct answer: C. Rs. 7,800
- A. Rs. 6,500
- B. Rs. 7,200
- C. Rs. 7,800
- D. Rs. 8,400
Explanation
For equal monthly drawings made at the beginning of each month, the average period is 6.5 months. Interest is Rs. 144,000 multiplied by 10% and 6.5/12, producing Rs. 7,800. Using six months would incorrectly assume middle-of-month withdrawals.
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About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
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