Question

If a partner withdraws equal amount in the middle of each quarter, then ______ are to be considered for interest on total drawings.

• A. \(5.5\) months
• B. \(6\) months
• C. \(4.5\) months
• D. \(7.5\) months

Hint:

Standard average periods used in partnership accounts:
• Beginning of every month \(\rightarrow 6.5\) months
• Middle of every month \(\rightarrow 6\) months
• End of every month \(\rightarrow 5.5\) months
• Beginning of every quarter \(\rightarrow 7.5\) months
• Middle of every quarter \(\rightarrow 6\) months
• End of every quarter \(\rightarrow 4.5\) months Memorizing these standard periods helps solve accounting MCQs quickly and accurately during examinations.

Answer 1

The Correct Option is B

Concept: In partnership accounting, interest on drawings is charged because the partner withdraws money from the business for personal use before the end of the accounting year. Since the withdrawn amount remains outside the business for a certain period, the firm loses the opportunity to use that money in business operations. When equal drawings are made at regular intervals, instead of calculating interest separately on every withdrawal, we use the average period method. This method converts all drawings into one equivalent amount withdrawn for an average time period. For quarterly drawings:
• There are four withdrawals in one accounting year.
• Each quarter represents a period of \(3\) months.
• The average time depends upon whether the drawings are made:
• at the beginning of the quarter,
• in the middle of the quarter, or
• at the end of the quarter. In this question, withdrawals are made in the middle of each quarter. Therefore, we calculate the average period accordingly.

Step 1: Understanding the timing of drawings.}
A financial year consists of: \[ 12 \text{ months} \] Since drawings are made every quarter: \[ \frac{12}{3} = 4 \] Thus, there are: \[ 4 \text{ drawings in a year} \] The quarters are: \[ \text{April--June, July--September, October--December, January--March} \] Since withdrawals are made in the middle of each quarter, the drawings occur approximately in: \[ \text{Middle of May, Middle of August, Middle of November, and Middle of February} \]

Step 2: Calculating the period for which each drawing remains withdrawn.}
Now we determine for how many months each drawing remains outside the business till the end of the accounting year. {|c|c|} Drawing Made In & Period for Interest
Middle of 1st Quarter & \(10.5\) months
Middle of 2nd Quarter & \(7.5\) months
Middle of 3rd Quarter & \(4.5\) months
Middle of 4th Quarter & \(1.5\) months
Therefore, the periods are: \[ 10.5,\ 7.5,\ 4.5,\ 1.5 \]

Step 3: Finding the average period.}
Average period is calculated using: \[ \text{Average Period} = \frac{\text{Total of all periods}}{\text{Number of drawings}} \] Substituting the values: \[ = \frac{10.5 + 7.5 + 4.5 + 1.5}{4} \] \[ = \frac{24}{4} \] \[ = 6 \text{ months} \] Hence, the average period to be considered for interest on drawings is: \[ \boxed{6 \text{ months}} \]

Step 4: Selecting the correct option.}
From the calculation above: \[ \boxed{6 \text{ months}} \] Therefore, the correct option is: \[ \boxed{\text{Option (B)}} \]