Question

Explain any one method of calculation of interest on drawings.

Hint:

The Fixed Amount Method calculates interest based on the fixed withdrawal and the time of withdrawal.

Answer 1

Step 1: Concept of Interest on Drawings.
Interest on drawings is charged to the partners for the amount of money they withdraw from the business. It is calculated based on the amount withdrawn and the time for which it is withdrawn.
Step 2: One Method of Calculation.
One common method is the **Fixed Amount Method**, where interest is charged on the fixed amount of drawings made by a partner at a given rate of interest.
Step 3: Formula for Calculation.
Interest = \( \text{Amount of Drawings} \times \text{Rate of Interest} \times \frac{\text{Time Period}}{12} \)
Step 4: Conclusion.
Thus, under the Fixed Amount Method, interest is charged on the fixed amount withdrawn by the partner over the time it was withdrawn. Final Answer: \[ \boxed{\text{Interest is calculated on the fixed amount withdrawn by the partner.}} \]