List-I (Equal amount of drawings made) | List-II (Number of month for which interest calculated) |
---|---|
(A) At the end of each half year | (I) 4.5 months |
(B) At the beginning of each quarter | (II) 6.5 months |
(C) At the beginning of each month | (III) 7.5 months |
(D) At the end of each quarter | (IV) 3 months |
(A) - (III), (B) - (II), (C) - (I), (D) - (IV)
To solve this, we need to understand how interest on drawings is calculated when drawings are made at different intervals (beginning or end of periods). In the case of equal amount of drawings, the interest is calculated based on the time the drawings remain in the business.
(A) At the end of each half year:
If drawings are made at the end of each half year, the interest is calculated for a period of 4.5 months. This is because half of the year (6 months) will have passed, and since the drawing is made at the end of the period, the interest will be calculated for 6 months, less the time until the end of the current period. This results in a time period of 4.5 months.
(B) At the beginning of each quarter:
Drawings made at the beginning of each quarter will remain in the business for the full 3 months of the quarter, and thus interest will be calculated for a period of 6.5 months, which is the average duration.
(C) At the beginning of each month:
When drawings are made at the beginning of each month, the interest will be calculated for a full 7.5 months, as each drawing will stay in the business for the entire month plus the rest of the period of the next months.
(D) At the end of each quarter:
When drawings are made at the end of each quarter, they will remain in the business for the next 3 months, which is the time frame for which interest is calculated.
Thus, the matching is as follows:
Therefore, the correct option is: (A) - (III), (B) - (II), (C) - (I), (D) - (IV)
When equal amounts are drawn at regular intervals, interest on drawings is calculated based on the timing of these drawings within the fiscal year, taking into account the average period of fund use.
Below are the average time periods for interest calculation based on different drawing schedules:
The average period is calculated to determine the equivalent time for which the drawn amounts were used by the partner/proprietor. This is crucial for accurately calculating the interest on those drawings.
Based on the information provided, the average time periods for calculating interest on drawings are as stated above. The correct answer, as mentioned, is Option (2), however, it's vital to double-check the given value for cases A and D based on the standard calculation explained above.
Bittu and Chintu were partners in a firm sharing profit and losses in the ratio of 4 : 3. Their Balance Sheet as at 31st March, 2024 was as follows:
On 1st April, 2024, Diya was admitted in the firm for \( \frac{1}{7} \)th share in the profits on the following terms:
Prepare Revaluation Account and Partners' Capital Accounts.