## Calculate interest on drawings of Ashok @ 10% p.a. for the year ended 31st March, 2022, in each of the following alternative cases: Case 1.  If he withdrew Rs. 7,500 in the beginning of each quarter. Case 2.  If he withdrew Rs. 7,500 at the end of each quarter. Case 3.  If he withdrew Rs. 7,500 during the middle of each quarter.

SOLUTION

Total Drawings = 7,500 × 4 = Rs. 30,000
Interest Rate = 10% p.a.

Case (a)

When equal amount is withdrawn in the beginning of each quarter, the interest on drawings is calculated for an average period of 7.5 months
Interest on drawing = total drawing × Rate of drawing /  100 × Average month /  12
Interest on Ashok’s drawing = 30,000 × 10 / 100 × 7.5 /  12 = 1,875

Case (b)

When equal amount is withdrawn at the end of each quarter, the interest on drawings is calculated for an average period of 4.5 months
Interest on drawing = total drawing × Rate of drawing /  100 × Average month /  12
Interest on Ashok’s drawing = 30,000 × 10 /  100 × 4.5 / 12 = 1,125

Case (c)

When equal amount is withdrawn in the middle of each quarter, the interest on drawings is calculated for an average period of 6 months
Interest on drawing = total drawing × Rate of drawing /  100 × Average month /  12
Interest on Ashok’s drawing = 30,000 × 10 / 100 × 6 / 12 = 1,500