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How to Calculate of Interest on drawings?

Interest on drawings is calculated at a fixed rate for actual period i.e. from the date of drawings to the date when final accounts are being prepared. As all the drawings are not made on a single day, proprietor withdraws money for his personal use as and when he requires thus the calculation of interest on drawings is to be done for each individual withdrawal by applying the product method.

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Above method of calculation of interest can be adopted only when dates of drawings are given for each drawing. In absence of such an information it is presumed that drawings have been made in equal installments each month on 15th day. In such case interest on total amount of drawings should be calculated for 6 months.

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