AccountancyCBSE Class 12 · Accounting for Partnership: Basic Concepts

Interest on Drawings Class 12: Average Period and Product Method with Solved Questions

Updated 15 October 2026 · Fact-checked

Interest on drawings is interest the firm charges a partner on amounts withdrawn for personal use, but only if the deed provides for it. It is charged for the time each amount stays out: by the average period for equal regular drawings, or by the product method for unequal ones. It is credited to the appropriation account.

Count months from the withdrawal date to year-end: earlier drawings stay out longer and carry more interest, and only if the deed allows it.

Illustration drawn for QuestionBuddy.

Understand Interest on Drawings

What and why. Drawings are amounts (cash or goods) a partner takes out for personal use during the year. If the partnership deed provides for interest on drawings, the firm charges interest for the period each withdrawal stayed out, up to the end of the accounting year. This compensates the partners who did not withdraw. If the deed is silent, no interest on drawings is charged (Indian Partnership Act, 1932).

The key idea: time from the date of withdrawal to the year-end. A withdrawal on 1st April (start of the year) is out for 12 months; one on 1st March is out for 1 month; one on 31st March for 0 months.

Method 1: Simple interest when dates are given for each amount. Interest = Amount × Rate × Months/12 for each drawing, then add.

Method 2: Product method (unequal amounts or irregular dates). Multiply each amount by the months it stayed out, add the products, then Interest = Sum of products × Rate/100 × 1/12.

Method 3: Average period (equal amounts at regular intervals). Interest = Total drawings × Rate/100 × Average period/12, where average period = (months left after the first drawing + months left after the last drawing) ÷ 2.

Monthly, for a full year: beginning 6.5, middle 6, end 5.5 months.
Quarterly, for a full year: beginning 7.5, middle 6, end 4.5 months.
Half-yearly: beginning 9, end 3 months.
Part of the year (say, 1st October to 1st March at the start of each month): first drawing out 6 months, last 1 month, so the average is 3.5 months.

When dates are not given. If only total drawings are given, charge interest for 6 months on average (drawings assumed spread evenly).

Journal entries.
1. Partner's Capital/Current A/c Dr; To Interest on Drawings A/c.
2. Interest on Drawings A/c Dr; To Profit and Loss Appropriation A/c.
Use the Current Account when capitals are fixed. Interest on drawings is an income of the firm and appears on the credit side of the appropriation account.

Interest on Drawings: key facts

Interest on each drawing: Amount × Rate/100 × Months to year-end/12
Product method: Interest = Σ(Amount × months) × Rate/100 × 1/12; Use for unequal amounts or irregular dates.
Average period: (Months left after first drawing + months left after last drawing) ÷ 2; Interest = Total drawings × Rate/100 × Average period/12.
Monthly drawings (12 months): Beginning 6.5; middle 6; end 5.5 months
Quarterly drawings (4 quarters): Beginning 7.5; middle 6; end 4.5 months
Dates not given: Total drawings × Rate/100 × 6/12; Drawings assumed evenly spread.

How to answer Interest on Drawings questions

First decide which pattern the drawings follow; the method follows from the pattern.

1Check the deed: no provision means no interest on drawings.
2Note the year-end (usually 31st March) and whether the rate is per annum.
3Equal amounts at regular intervals: find the average period from the first and last drawing.
4Unequal amounts or irregular dates: list each amount with its months to year-end and use the product method.
5Only a total given: charge for 6 months.
6Show the formula line with numbers substituted, then the answer; pass the two journal entries if asked.

Interest on Drawings in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Average period: beginning versus end of the month

Suppose two partners in a bakery each take ₹5,000 a month for household expenses. Riya takes hers on the first of every month; Sameer waits until the last day of every month. The deed charges interest on drawings at 12% p.a.

Calculate the interest charged to each for the year and explain why the amounts differ although both withdrew ₹60,000.

Try it first, then show the solutionSolution

Riya, beginning of each month: average period 6.5 months; 60,000 × 12% × 6.5/12 = ₹3,900.
Sameer, end of each month: average period 5.5 months; 60,000 × 12% × 5.5/12 = ₹3,300.
Riya's money left the business one month earlier each time, so it was out for longer.

Answer: Riya pays ₹3,900 and Sameer ₹3,300. The total withdrawn is the same, but Riya's drawings stay out of the business for 6.5 months on average against Sameer's 5.5, so she is charged for one more month on average: ₹600 more.

Memory hook: Interest on drawings is rent for time: the earlier you take, the more you pay.

Tricks to remember Interest on Drawings

Short memory aids. Say each one aloud once, then use it on a question the same day.

6.5 / 6 / 5.5 and 7.5 / 6 / 4.5
Start, middle, end. The middle is always 6; monthly moves half a month either side, quarterly a month and a half.
Use it when: Average period MCQs.
First plus last, by two
Average period = (months left after the first + months left after the last) ÷ 2. Works for part years too.
Use it when: Drawings for only some months.
Silent deed, silent interest
No deed clause, no interest on drawings (and none on capital).
Use it when: Act-provision questions.

Interest on Drawings: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Monthly drawings at the end of the month · 1 mark · MCQBoard level

A partner withdrew ₹5,000 at the end of every month during the year ended 31st March 2026. Interest on drawings is charged at 12% p.a. The interest on drawings is:
(a) ₹3,900
(b) ₹3,600
(c) ₹3,300
(d) ₹7,200

Try it first, then show the solutionSolution

Total drawings ₹60,000; end of each month gives an average period of 5.5 months.
60,000 × 12/100 × 5.5/12 = ₹3,300.

Answer: (c) ₹3,300

Example 2: Product method for irregular drawings · 3 marks · Short answerBoard level

Asif, a partner, made the following drawings during the year ended 31st March 2026: 1st June 2025 ₹12,000; 1st September 2025 ₹8,000; 1st December 2025 ₹10,000; 1st March 2026 ₹6,000. Interest on drawings is charged at 10% p.a. Calculate the interest on drawings by the product method. (3 marks)

Try it first, then show the solutionSolution

Months to 31st March: 1 June 10, 1 September 7, 1 December 4, 1 March 1.
Products: 1,20,000 + 56,000 + 40,000 + 6,000 = 2,22,000.
Interest = 2,22,000 × 10/100 × 1/12 = ₹1,850.

Answer: Interest on drawings = ₹1,850.

Example 3: Quarterly drawings at the beginning · 3 marks · Short answerHarder board level

Divya withdrew ₹15,000 at the beginning of each quarter during the year ended 31st March 2026. Interest on drawings is 8% p.a. Calculate the interest and pass the journal entries, assuming fixed capitals. (3 marks)

Try it first, then show the solutionSolution

Total ₹60,000; beginning of each quarter: average period 7.5 months.
Interest = 60,000 × 8/100 × 7.5/12 = ₹3,000.
Entries: Divya's Current A/c Dr 3,000 To Interest on Drawings A/c 3,000; Interest on Drawings A/c Dr 3,000 To Profit and Loss Appropriation A/c 3,000.

Answer: Interest on drawings = ₹3,000, debited to Divya's Current Account and transferred to the Profit and Loss Appropriation Account.

Example 4: Drawings for part of the year · 3 marks · Short answerHarder board level

Farhan withdrew ₹10,000 at the beginning of each month from 1st October 2025 to 1st March 2026. Interest on drawings is 12% p.a. and the books close on 31st March 2026. Calculate the interest on drawings. (3 marks)

Try it first, then show the solutionSolution

Six drawings, total ₹60,000.
Months left: after 1 October 6, after 1 March 1; average period = (6 + 1)/2 = 3.5 months.
Interest = 60,000 × 12/100 × 3.5/12 = ₹2,100 (product check: 10,000 × 21 × 12/100 × 1/12 = 2,100).

Answer: Interest on drawings = ₹2,100.

Example 5: Find the rate · 3 marks · Short answerHOTS / competency

A partner withdrew an equal amount at the end of each quarter, totalling ₹80,000 for the year. The interest charged on his drawings was ₹3,000. Calculate the rate of interest. (3 marks)

Try it first, then show the solutionSolution

End of each quarter: average period 4.5 months.
3,000 = 80,000 × r/100 × 4.5/12.
r = 3,000 × 1,200 / (80,000 × 4.5) = 10%.

Answer: Rate of interest = 10% p.a.

Example 6: Middle of the month for nine months · 3 marks · Short answerHOTS / competency

Gauri withdrew ₹8,000 in the middle of every month from April to December 2025 (nine drawings). Interest on drawings is 9% p.a.; the year ends on 31st March 2026. Calculate the interest. (3 marks)

Try it first, then show the solutionSolution

Total = ₹72,000.
Months left: after 15 April 11.5, after 15 December 3.5; average = (11.5 + 3.5)/2 = 7.5 months.
Interest = 72,000 × 9/100 × 7.5/12 = ₹4,050.

Answer: Interest on drawings = ₹4,050.

Where students lose marks in Interest on Drawings

The slips examiners see most often, and what to write instead.

Mistake: Using 6.5 months for drawings that stop mid-year
Applying the full-year table to a part year.
Wrong working
60,000 × 12% × 6.5/12 = 3,900 for October to March drawings.
Right working
Average = (6 + 1)/2 = 3.5 months; 60,000 × 12% × 3.5/12 = 2,100.
Do this: Always compute (first + last) ÷ 2 for part years.
Usually costs: 2 marks.
Mistake: Forgetting to divide by 12
Rate is per annum but the period is in months.
Wrong working
2,22,000 × 10% = 22,200
Right working
2,22,000 × 10% × 1/12 = 1,850
Do this: Products are in rupee-months; divide by 12.
Usually costs: 1-2 marks.
Mistake: Charging interest when the deed is silent
Assuming interest is always charged.
Wrong working
Interest at 6% on drawings (no deed).
Right working
No interest on drawings without a provision in the deed.
Do this: Check the deed first.
Usually costs: 1 mark.
Mistake: Counting months from the start of the year
Measuring the wrong span.
Wrong working
Drawing on 1st December: 8 months (April to November).
Right working
Months to year-end: December to March = 4 months.
Do this: Count forward to 31st March.
Usually costs: 1 mark per drawing.

Exam tips

Write the average period with its reason, for example 'beginning of each quarter: 7.5 months'.
In the product method, show a small table (date, amount, months, product); it earns the step marks.
If the rate is not 'per annum' but a flat percentage, charge it on the total without time.
Interest on drawings is a 1-mark MCQ or part of a 3- or 4-mark appropriation question.

Practice questions on Interest on Drawings

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
In the absence of a partnership deed, interest on drawings is charged at:
(a) 6% p.a.
(b) 5% p.a.
(c) 12% p.a.
(d) nil
Hint
Act provisions.
Answer
(d) nil
Q2 · 1 mark · MCQBoard level
A partner withdraws an equal amount at the end of each quarter. The average period for interest on drawings is:
(a) 7.5 months
(b) 6 months
(c) 4.5 months
(d) 5.5 months
Hint
(9 + 0)/2.
Answer
(c) 4.5 months
Q3 · 3 marks · Short answerBoard level
Hina withdrew ₹6,000 at the beginning of every month for the year ended 31st March 2026. Interest is charged at 10% p.a. Calculate the interest on drawings. (3 marks)
Hint
6.5 months.
Answer
Total ₹72,000; 72,000 × 10/100 × 6.5/12 = ₹3,900.
Q4 · 3 marks · Short answerHarder board level
Ishaan withdrew ₹30,000 on 1st April 2025 and ₹30,000 on 1st October 2025. Interest on drawings is 12% p.a.; books close on 31st March 2026. Calculate the interest. (3 marks)
Hint
Half-yearly at the beginning: 9 months.
Answer
Average period (12 + 6)/2 = 9 months; 60,000 × 12/100 × 9/12 = ₹5,400 (product check: 30,000 × 12 + 30,000 × 6 = 5,40,000; × 12% ÷ 12 = 5,400).
Q5 · 4 marks · Short answerHarder board level
Jaya's drawings were: 1st May 2025 ₹20,000; 31st July 2025 ₹15,000; 1st November 2025 ₹10,000; 31st January 2026 ₹5,000. Interest is 6% p.a. and the year ends on 31st March 2026. Calculate interest by the product method. (4 marks)
Hint
Months: 11, 8, 5, 2.
Answer
Products: 2,20,000 + 1,20,000 + 50,000 + 10,000 = 4,00,000. Interest = 4,00,000 × 6/100 × 1/12 = ₹2,000.
Q6 · 1 mark · Very short answerHarder board level
Kunal's total drawings for the year were ₹50,000; the dates are not given. Interest on drawings is 8% p.a. Calculate the interest. (1 mark)
Hint
Assume 6 months.
Answer
50,000 × 8/100 × 6/12 = ₹2,000.
Q7 · 3 marks · Short answerHarder board level
Sana and Tarun have fixed capitals. Interest on Sana's drawings is ₹3,600. Pass the journal entries for charging and closing the interest on drawings. (3 marks)
Hint
Fixed capitals mean current accounts.
Answer
(1) Sana's Current A/c Dr 3,600 To Interest on Drawings A/c 3,600 (interest charged on drawings). (2) Interest on Drawings A/c Dr 3,600 To Profit and Loss Appropriation A/c 3,600 (interest on drawings transferred).
Q8 · 1 mark · Assertion-reasonHarder board level
Assertion (A): Interest on drawings is shown on the credit side of the Profit and Loss Appropriation Account.
Reason (R): Interest on drawings is a gain to the firm, recovered from the partner.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Hint
Who gains?
Answer
(a) Both A and R are true, and R is the correct explanation of A.
Q9 · 3 marks · Short answerHOTS / competency
Lavanya withdraws ₹10,000 at the beginning of each quarter and Manav withdraws ₹10,000 at the end of each quarter. Interest on drawings is 12% p.a. By how much is Lavanya's interest more than Manav's, and why? (3 marks)
Hint
7.5 months against 4.5 months.
Answer
Lavanya: 40,000 × 12% × 7.5/12 = ₹3,000. Manav: 40,000 × 12% × 4.5/12 = ₹1,800. Lavanya pays ₹1,200 more because each of her withdrawals stays out of the business three months longer.
Q10 · 3 marks · Short answerHOTS / competency
A partner withdrew an equal amount in the middle of every month. Interest on drawings at 10% p.a. came to ₹1,800 for the year. How much did he withdraw each month? (3 marks)
Hint
Average period 6 months; find the total first.
Answer
1,800 = Total × 10/100 × 6/12, so Total = ₹36,000; monthly drawing = 36,000 ÷ 12 = ₹3,000.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Average period for monthly drawings at the beginning of each month?Show answer
6.5 months.
2.Average period for drawings at the beginning of each quarter?Show answer
7.5 months.
3.Interest on ₹40,000 total drawings, dates not given, at 9% p.a.?Show answer
40,000 × 9% × 6/12 = ₹1,800.
4.Which account is credited when interest on drawings is charged?Show answer
Interest on Drawings Account, later closed to the Profit and Loss Appropriation Account.
5.Is interest on drawings charged if the deed is silent?Show answer
No.

Interest on Drawings: frequently asked questions

What is the average period for interest on drawings in Class 12?

Half of the sum of the months left after the first and the last drawing. For a full year of monthly drawings it is 6.5, 6 or 5.5 months (beginning, middle, end); for quarterly drawings 7.5, 6 or 4.5 months.

When should I use the product method?

When the amounts are unequal or the dates are irregular. Multiply each amount by the months to year-end, add, and charge Rate/100 × 1/12 on the total.

What if dates of drawings are not given?

Charge interest on the total drawings for 6 months on average.

Is interest on drawings an expense of the firm?

No. It is an income of the firm, credited to the Profit and Loss Appropriation Account and debited to the partner.