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HomeTamil Nadu HSC (Class 12)accountancyAccounts of Partnership Firms - Fundamentals › Which method of computing interest on drawings s…

Which method of computing interest on drawings suits different amounts withdrawn at different intervals?

AThe average period method only
BThe direct method of computation
COnly the fixed instalment method
DNo interest can be computed then
Answer & Solution
Correct answer: B. The direct method of computation
1. The textbook gives three approaches: the direct method, the product method and the average period method. 2. Under the direct method interest is calculated on each drawing for the period from the date of drawing to the closing date of the year. 3. The book states that this method is suitable when different amounts are withdrawn at different time intervals. 4. The average period method applies only where a fixed amount is withdrawn at fixed intervals, such as monthly, quarterly or half-yearly. 5. The product method can be used in all situations as an alternative to the direct method. _Source: TN HSC Class 12 Accountancy (Samacheer Kalvi, Govt of Tamil Nadu), Unit 3 "Accounts of Partnership Firms - Fundamentals", §3.7.3 and §3.7.4_
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