Partnership Drawing interest Calculation

Last post we discuss about Partnership Now we discuss most important topic in partnership. Yes Partner Drawing Calculation method differ form other interest calculation. Now we discuss how to calculate Drawing Interest.

Partners Drawing Interest Calculation Method

There are four latest method apply , if any body withdraws any fund or cash for personal use from his firm .

1. If any partner withdraws every month in the first day the he will pay to firm @ given rate for 6.5 months (month Drawing X R/100X6.5)
2. If any partner withdraws every month in the middle of month , he will pay interest on drawing @ given rate for 6 months  (month Drawing X R/100X6)
3. If any partner withdraws every month in the end of month , he will pay interest on drawing @ given rate for 5.5 months  (month Drawing X R/100X5.5)
4. 4.    If any partner does not withdraw every month then his withdrawing month usage product will be calculated

For Example

suppose if he withdraw Rs.5000 in first of march then will calculate product of 5000

after calculating product he calculate his payable interest on drawing @ given rate
= amount of product X R/100 X 1/12

 = 5000XR/100X10/12

Note went you calculate time period using this formula.

Sn=n/2(a+l)

For Example drawing in every starting of month

Sn=12/2(12+1)x1/12

    =12/2(13)X1/12

   =6.5

Middle of Month

Sn=12/2(11.5+0.5)X1/12

   = 6

First month half interest and also last month half Interest

Last day in month

Sn=1/2(11+0)X1/12

    = 5.5

Drawing in every two month and also begging

Sn=6/2(12+2)X1/12

    =42X1/12

    = 3.5

now you can try Middle , End of months any this problems conduct.

Other words Drawing Interest Calculation

There on two methods of calculating Interest on Drawings:-

1) Simple Method:-  Under this method, interest on drawing is calculated separately on each amount of drawings for the duration of time the amount of drawings has been used by the partner i.e. from the date of drawings till the close of accounting period.

    Interest on Drawings = Amount of Drawings X (Rate of Inerest/100) X (Months/12)

2) Product Method:- Under this method each amount of drawings is multiplied by its duration. Then all the products are added up and the interest is calculated on the total of products for one month.

    Interest on Drawings = Total of Products X ( Rate of Inerest/100 ) X ( 1/12)