Calculation of Drawings with Equal Monthly Amount

In a business, the owner may decide to draw a fixed amount of money every month as a salary. This is known as drawings. If the same amount is drawn every month at the beginning of each month, the calculation of drawings becomes relatively simple. Let us understand how to calculate the time period taken into consideration for such a scenario.

Formula for Calculation

The formula for calculating the time period taken into consideration when equal monthly amounts are drawn as drawings at the beginning of each month is:

Time Period = (Total Drawings / Monthly Drawings) - 1

Explanation of Formula

Let us assume that the total drawings made by the owner are Rs. 65,000 and the monthly drawings are Rs. 10,000. Using the above formula, we can calculate the time period taken into consideration for the calculation of drawings as follows:

Time Period = (65,000 / 10,000) - 1
Time Period = 6.5 months

Therefore, the correct answer to the question is option D, which states that 6.5 months would be taken into consideration for the calculation of drawings if equal monthly amounts are drawn at the beginning of each month.

Conclusion

The calculation of drawings is an important aspect of business accounting. By using the formula mentioned above, one can easily calculate the time period taken into consideration for the calculation of drawings when equal monthly amounts are drawn at the beginning of each month. It is important to keep track of such transactions to ensure proper financial management and avoid any discrepancies.