Question

If a fixed amount is withdrawn on the first day of every quarter, for what period the interest on total amount withdrawn will be calculated ?

Answer 1

When a fixed amount of money is withdrawn quarterly, it can be withdrawn either at the beginning, in the middle or at the end of each quarter. If the amount is withdrawn at the beginning of each quarter, the interest is calculated on the total money withdrawn during the year, for a period of seven and half months $\left(7\frac{1}{2}\right)$ months.

e.g., if a partner withdraws Rs 10,000. On first day of every quarter and rate of interest is 12% per annum the interest will be calculated as follows Interest on Drawings $=(10,000\times 4)\times 12\%\times \frac{7.5}{12}=Rs3,000$