When are Drawings Ignored or Considered?
| Scenario | Drawings Ignored? |
|---|---|
| Only opening capital given | ✅ Ignored |
| Opening + additional capital (with date) | ✅ Ignored |
| Drawings given BUT no dates | ✅ Ignored (can't calculate otherwise) |
| Drawings given WITH DATES | ❌ Considered (use product method) |
Methods
1. Only Opening Capital Given
Partner A: Opening Capital ₹1,00,000, Interest 10% p.a.
Interest = ₹1,00,000 × 10% = ₹10,000
2. With Additional Capital Only (No Drawings)
Partner B: Opening ₹80,000, Additional ₹20,000 on 1 July, Interest 10%, Year end 31 Dec.
Interest = (₹80,000 × 10%) + (₹20,000 × 10% × 6/12) = ₹8,000 + ₹1,000 = ₹9,000
3. With Drawings Only (Drawings Ignored – Simple Method, No Dates)
Partner C: Opening ₹1,50,000, Drawings ₹30,000, Interest 10%.
Interest = ₹1,50,000 × 10% = ₹15,000 (Drawings ignored because no dates given.)
4. With Additional Capital and Drawings (Drawings Ignored – Simple Method, No Dates)
Partner D: Opening ₹2,00,000, Additional ₹50,000 on 1 July, Drawings ₹40,000, Interest 10%, Year end 31 Dec.
Interest = (₹2,00,000 × 10%) + (₹50,000 × 10% × 6/12) = ₹20,000 + ₹2,500 = ₹22,500 (Drawings ignored.)
5. Finding Opening Capital When Missing
Closing Capital ₹1,80,000 + Drawings ₹20,000 – (Additional ₹30,000 + Share of Profit ₹50,000 + Salary ₹10,000) = Opening ₹1,10,000
Interest @10% = (₹1,10,000 × 10%) + (₹30,000 × 10% × 6/12) = ₹11,000 + ₹1,500 = ₹12,500
6. Firm Incurs a Loss
Partners F (₹2,50,000) and G (₹1,50,000), Interest 10%, Loss ₹40,000.
No interest allowed (unless deed specifically permits). Loss shared in profit‑sharing ratio.
7. Profit Less Than Total Interest Due
Interest Due: H ₹12,000, I ₹8,000 (Total ₹20,000). Profit Available: ₹15,000.
Distribution in ratio 12:8 = 3:2
H = (3/5) × ₹15,000 = ₹9,000
I = (2/5) × ₹15,000 = ₹6,000
8. Product Method – With Additional Capital Only (Dates Considered)
Partner J: Opening ₹1,00,000 on 1 April; Additional ₹20,000 on 1 July. Interest 10%, year ends 31 March.
Products: Apr–Jun: ₹1,00,000 × 3 = 3,00,000; Jul–Mar: ₹1,20,000 × 9 = 10,80,000; Total = 13,80,000
Interest = (13,80,000 × 10/100) / 12 = ₹1,38,000 / 12 = ₹11,500
9. Product Method – With Drawings Only (Dates Considered)
Partner K: Opening ₹2,00,000 on 1 April; Drawings ₹10,000 on 1 October. Interest 10%, year ends 31 March.
Products: Apr–Sep: ₹2,00,000 × 6 = 12,00,000; Oct–Mar: ₹1,90,000 × 6 = 11,40,000; Total = 23,40,000
Interest = (23,40,000 × 10/100) / 12 = ₹2,34,000 / 12 = ₹19,500
10. Product Method – With Both Additional Capital and Drawings (Dates Considered)
Partner L: Opening ₹1,00,000 on 1 April; Additional ₹20,000 on 1 July; Drawings ₹10,000 on 1 October. Interest 10%, year ends 31 March.
Products: Apr–Jun: ₹1,00,000 × 3 = 3,00,000; Jul–Sep: ₹1,20,000 × 3 = 3,60,000; Oct–Mar: ₹1,10,000 × 6 = 6,60,000; Total = 13,20,000
Interest = (13,20,000 × 10/100) / 12 = ₹1,32,000 / 12 = ₹11,000