Ravi, Mohan, and Vinod are partners in a firm sharing profits and losses in the ratio of 2:2:1. The partnership deed provided that interest on partner's drawings will be charged at 12% p.a. Starting from 1st July, 2024, Mohan withdrew ₹20,000 every month for his personal use. For the year ended 31st March, 2025, interest on Mohan's drawings will be charged for how many months?
a) 6 months
b) 5 1/2 months
c) 6 1/2 months
d) 5 months
Answer (2)
To calculate the interest on Mohan's drawings, we need to determine how long the drawings have been accruing interest.
Time Period
Mohan began withdrawing ₹20,000 every month starting on 1st July 2024.
The financial year ends on 31st March 2025.
Therefore, the period of time over which interest should be calculated is from 1st July 2024 to 31st March 2025.
Number of Months
July: Full month
August: Full month
September: Full month
October: Full month
November: Full month
December: Full month
January: Full month
February: Full month
March: Full month
Mohan is withdrawing money from July to March, which is a total of 9 months.
Interest Calculation
Since the average time for which each monthly drawing of ₹20,000 is outstanding will be considered when calculating interest, a mid-year method is often used, simplifying calculations by considering the average number of months each drawing has been used. This average is usually considered as halfway through the period for ease.
Average Time (Simplification for Interest Calculation)
For a sum withdrawn evenly throughout the months, interest for the entire fiscal period is considered on an average basis.
Here, the average time for interest calculation is typically calculated from the middle of the period, which is 5.5 months out of the total 9 months the drawings are made.
Therefore, the correct number of months for calculating interest on Mohan’s drawings is 5 1/2 months .
The correct choice is:
b) 5 1/2 months
Mohan's drawings began on 1st July 2024 and continued until 31st March 2025, totaling 9 months. However, for interest calculation at 12% per annum, the average duration is considered to be 5.5 months. Therefore, the correct answer is b) 5 1/2 months.
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