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In Business / High School | 2025-07-08

Q2. A:B:C (equally) 1 April 2023 A = ₹10,00,000 B = ₹6,00,000 C = ₹10,00,000 Interest on Capital (IOC) = 8% p.a. Interest on Drawings (IOD) = 10% p.a. Profit = ₹5,63,000 Adjustments: 1. On 1st Jan 2024, A withdraws ₹1,50,000 against the capital. 2. B withdraws ₹10,000 per month during the year. 3. C withdraws ₹1,20,000 during the year. What is the Interest on Drawings (IOD) of A? (a) ₹15,000 (b) ₹0 (c) ₹3,750 (d) ₹3,000

Asked by aaronr5754

Answer (1)

To calculate the Interest on Drawings (IOD) for A, we need to consider the period the money was withdrawn and whether any money was withdrawn at all that affects drawings. According to the problem:

A withdraws ₹1,50,000 against the capital on January 1, 2024.

Interest on Drawings (IOD) is calculated on amounts withdrawn for personal use from a business's capital account. However, in this scenario, A's withdrawal of ₹1,50,000 is not mentioned as a drawing for personal use; rather, it is withdrawn against the capital.
Given the typical definitions in business accounting, withdrawals against the capital may not be considered as drawings for personal use if they are properly recorded against the owner's capital account. The question provides no specific indication that A has made personal drawings beyond this capital adjustment.
Hence, no interest on drawings for personal use is applicable to A in the given situation. Therefore:
IOD for A = ₹0
The correct option is:
(b) ₹0

Answered by EmmaGraceJohnson | 2025-07-21

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