Interest on Drawings & Cases | Crash Course of Accountancy - Class 12 - Commerce PDF Download

Interest on drawings

· P & L appropriation a/c cr. side
· Capital / current a/c dr. Side

Journal entry 
(i) On Charging Interest on Drawings : 
Partner’s Capital A/c Dr.

To Interest on Drawings A/c
(ii) On closure of Interest on Drawings A/c : 
Interest on Drawings A/c Dr.
To Profit & Loss Appropriation A/c

Common kahani 
Jojo and yoyo are partners in Modern Tours and Travels who had withdrew money during the year ending March 31, 2015 from his capital account, for his personal use. Calculate interest in drawings in each of the following alternative situations-

CASE 1 
Jojo had withdrawn Rs.50,000 and Yoyo had withdrawn Rs.40,000 during the year. Provide interest to them @12%p.a.

Solution- 
If date is not mentioned then interest is to be calculated for 6months
Jojo’s Interest on Drawings = 50,000 ∗ 12/10012 ∗ 6 = 3,000
Yoyo’s Interest on Drawings = 40,000 ∗ 12/100 ∗ 6/12 = 2,400

CASE 2

Jojo had withdrawn Rs.50,000  on 31st july 2014 and Yoyo had withdrawn Rs.40,000 on 1st November 2014 during the year. Provide interest to them @12%p.a.

Solution-
If date is mentioned then interest is to be calculated as per the date of drawings
Jojo’s Interest on Drawings = 50,000 ∗ 12/100 ∗ 8/12 = 4,000
Yoyo’s Interest on Drawings = 40,000 ∗ 12/100 ∗ 5/12 = 2,000

CASE 3

Jojo had withdrawn Rs.50,000  on 1st july 2014 and Yoyo had withdrawn Rs.40,000 on 30th November 2014 during the year. Provide interest to them @12%.

Solution-
If date is mentioned but rate of interest on drawings is not given with per annum then interest is to be charged for the full year , irrespective of the time period
Jojo’s Interest on Drawings = 50,000 ∗ 12/100 = 6,000

Yoyo’s Interest on Drawings = 40,000 ∗ 12/100 = 4,800

CASE 4
Provide interest to them @12%p.a. if there drawings were-

Solution- If amount is withdrawn on different dates then product method is to be used

Jojo’s Interest on Drawings = 1,35,000 ∗ 12/100 ∗ 1/12 = 13,500

Yoyo’s Interest on Drawings = 1,36,000 ∗ 12/100 ∗ 1/12 = 13,600

Shortcut method 
When same amount is withdrawn on the same date after the same interval. (3 same)
Months = time after the first drawings + time after the last drawings/2

CASE 5

Jojo had withdrawn Rs.5,000 at the beginning of every month  and Yoyo had withdrawn Rs.4,000 at the beginning of every month .Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method 
Find 1- amount 5000 ∗ 12 = 60,000
         2 – Time after the first drawings = 12 months (from 1st April to 31st march)
         3 - Time after the last drawings = 1 month (from 1st March to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (12 + 1/2) = 13/2 = 6.5 MONTHS

Jojo’s Interest on Drawings = 60,000 ∗ 12/100 ∗ 6.5/12 = 3,900

Yoyo’s Interest on Drawings = 48,000 ∗ 12/100 ∗ 6.5/12 = 3,120

CASE 6

Jojo had withdrawn Rs.3,000 at the middle of every month  and Yoyo had withdrawn Rs.2,000 at the middle of every month .Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method
Find 1- amount 3000 ∗ 12 = 36,000
         2 – Time after the first drawings = 11.5 months (from 15st April to 31st march)
         3 - Time after the last drawings = .5 month (from 16st March to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (11.5 + .5/2)  = 12/2 = 6 MONTHS

Jojo’s Interest on Drawings = 36,000 ∗ 12/100 ∗ 6/12 = 2,160

Yoyo’s Interest on Drawings = 24,000 ∗ 12/100 ∗ 6/12 = 1,440

CASE 7

Jojo had withdrawn Rs.8,000 at the end of every month  and Yoyo had withdrawn Rs.7,000 at the end of every month. Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method
Find 1- amount 8000 ∗ 12 = 96,000
         2 – Time after the first drawings = 11 months (from 30TH April to 31st march)
         3 - Time after the last drawings = 0 month (from 31st March to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (11 + 0/2)  = 11/2 = 5.5 MONTHS

Jojo’s Interest on Drawings = 96,000 ∗ 12/100 ∗ 5.5/12 = 5,280

Yoyo’s Interest on Drawings = 84,000 ∗ 12/100 ∗ 5.5/12 = 4,620

CASE 8

Jojo had withdrawn Rs.5,000 at the beginning of every quarter and Yoyo had withdrawn Rs.4,000 at the beginning of every quarter. Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method
Find 1- amount 5000 ∗ 4 = 20,000
         2 – Time after the first drawings = 12 months (from 1ST April to 31st march)
         3 - Time after the last drawings = 3 month (from 1st January to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (12 + 3/2) = 15/2 = 7.5 MONTHS

Jojo’s Interest on Drawings = 20,000 ∗ 12/100 ∗ 7.5/12 = 1,500

Yoyo’s Interest on Drawings = 16,000 ∗ 12/100 ∗ 7.5/12 = 1200

CASE 9

Jojo had withdrawn Rs.3,000 at the middle of every quarter  and Yoyo had withdrawn Rs.2,000 at the middle of every quarter .Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method
Find 1- amount 3000 ∗ 4 = 12,000
         2 – Time after the first drawings = 10.5 months (from 15th may to 31st march)
         3 - Time after the last drawings = 1.5 month (from 1st February to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (10.5 +1.5/2) = 12/2 = 6 MONTHS

Jojo’s Interest on Drawings = 12,000 ∗ 12/100 ∗ 6/12 = 720

Yoyo’s Interest on Drawings = 8,000 ∗ 12/100 ∗ 6/12 = 480

CASE 10

Jojo had withdrawn Rs.15,000 at the end of every quarter  and Yoyo had withdrawn Rs.10,000 at the end of every quarter. Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method
Find 1- amount 15000 ∗ 4 = 60,000
         2 – Time after the first drawings = 9 months (from 30thjune to 31st march)
         3 - Time after the last drawings = 0 month (from 31st march to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (9 +0/2)  = 9/2 = 4.5 MONTHS

Jojo’s Interest on Drawings = 60,000 ∗ 12/100 ∗ 4.5/12 = 2700

Yoyo’s Interest on Drawings = 40,000 ∗ 12/100 ∗ 4.5/12 = 1800

CASE 11

Jojo had withdrawn Rs.5,000 at the beginning of every month  and Yoyo had withdrawn Rs.4,000 at the beginning of every month from 1st October 2014(during a period of 6 months only) .Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method
Find 1- amount 5000 ∗ 6 = 30,000
         2 – Time after the first drawings = 6 months (from 1st October to 31st march)
         3 - Time after the last drawings = 1 month (from 1st march to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (6 +1/2)  = 7/2 = 3.5 MONTHS

Jojo’s Interest on Drawings = 30,000 ∗ 12/100 ∗ 3.5/12 = 1150

Yoyo’s Interest on Drawings = 24,000 ∗ 12/100 ∗ 3.5/12 = 840

CASE 12

Jojo had withdrawn Rs.4,000 at the middle of every month  and Yoyo had withdrawn Rs.6,000 at the middle of every month from 1st October 2014(during a period of 6 months only) .Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method
Find 1- amount 4000 ∗ 6 = 24,000
         2 – Time after the first drawings = 5.5 months (from 15st October to 31st march)
         3 - Time after the last drawings = .5 month (from 15st march to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (5.5 +.5/2)  = 6/2 = 3 MONTHS

Jojo’s Interest on Drawings = 24,000 ∗ 12/100 ∗ 3/12 = 720

Yoyo’s Interest on Drawings = 36,000 ∗ 12/100 ∗ 3/12 = 1080

CASE 13

Jojo had withdrawn Rs.7,500 at the end of every month  and Yoyo had withdrawn Rs.4,500 at the end of every month from 1st October 2014(during a period of 6 months only) .Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method
Find 1- amount 7500 ∗ 6 = 45000
         2 – Time after the first drawings = 5 months (from 31st October to 31st march)
         3 - Time after the last drawings = 0 month (from 31st march to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (5 +0/2) = 5/2 = 2.5 MONTHS

Jojo’s Interest on Drawings = 45,000 ∗ 12/100 ∗2.5/12 = 1125

Yoyo’s Interest on Drawings = 27,000 ∗ 12/100 ∗ 2.5/12 = 675

CASE 14

Jojo had withdrawn Rs.5,000 at the beginning of every month  and Yoyo had withdrawn Rs.4,000 at the beginning of every month from 1st july 2014(during a period of 9 months only) .Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method
Find 1- amount 5000 ∗ 9 = 45000
         2 – Time after the first drawings = 9 months (from 1st July to 31st march)
         3 - Time after the last drawings = 1 month (from 1st march to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (9 +1/2)  = 10/2 = 5 MONTHS

Jojo’s Interest on Drawings = 45,000 ∗ 12/100 ∗ 5/12 = 2250

Yoyo’s Interest on Drawings = 27,000 ∗ 12/100 ∗ 2.5/12 = 675

CASE 15

Jojo had withdrawn Rs.4,000 at the middle of every month  and Yoyo had withdrawn Rs.6,000 at the middle of every month from 1st july2014 (during a period of 9 months only) .Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method
Find 1- amount 4000 ∗ 9 = 36000
         2 – Time after the first drawings = 8.5 months (from 15th July to 31st march)
         3 - Time after the last drawings = .5 month (from 15st march to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (8.5 +.5/2)  = 9/2 = 4.5 MONTHS

Jojo’s Interest on Drawings = 36,000 ∗ 12/100 ∗ 4.5/12 = 1620

Yoyo’s Interest on Drawings = 54,000 ∗ 12/100 ∗ 4.5/12 = 2430

CASE 16

Jojo had withdrawn Rs.4,000 at the end of every month  and Yoyo had withdrawn Rs.6,000 at the end of every month from 1st july2014 (during a period of 9 months only) .Provide interest to them @12%p.a.

Solution-
If same amount is withdrawn on the same date after the same interval use Shortcut method
Find 1- amount 4000 ∗ 9 = 36000
         2 – Time after the first drawings = 8 months (from 1stJuly to 31st march)
         3 - Time after the last drawings = 0 month (from 31st march to 31st march)
         4 – Average months =  time after the first drawings + time after the last drawings/2

= (8 +0/2) = 8/2 = 4 MONTHS

Jojo’s Interest on Drawings = 36,000 ∗ 12/100 ∗ 4/12 = 1440

Yoyo’s Interest on Drawings = 54,000 ∗ 12/100 ∗ 4/12 = 2160

Cbse sample paper 2015 question for this 
Kanika and Gautam are partners doing a dry cleaning business in Lucknow, sharing profits in the ratio 2:1 with capitals Rs.5,00,000 and Rs.4,00,000 respectively. Kanika withdrew the following amounts during the year to pay the hostel expenses of her son.
1st April 10,000
1st June 9,000
1st Nov. 14,000
1st Dec. 5,000
Gautam withdrew Rs.15,000 on the first day of April, July, October and January to pay rent for the accommodation of his family. He also paid Rs.20,000 per month as rent for the office of partnership which was in a nearby shopping complex. Calculate interest on Drawings.

                                                                Jugad