Sumit, a partner in Tours and Travels withdrew money during the year ending March 31, 2020 from his capital account, for his personal use. Calculate interest on drawings at simple rate of interest of 10 percent per annum and if an amount of Rs. 4,000 per month was withdrawn by sumit at the end of each month.

Since Sumit withdraws Rs. 4,000 at the end of each month, we need to calculate interest for the period each withdrawal remains with him during the year.

Total Drawings for the year = Rs. 4,000 × 12 months = Rs. 48,000

When equal amounts are withdrawn at the end of every month, the average period for which interest is charged is calculated using:

Average Period = $\frac{n-1}{2}$ months

where $n$ = number of months = 12

Average Period = $\frac{12-1}{2}$ = $\frac{11}{2}$ = 5.5 months

This is because:

• Amount withdrawn at end of Month 1 → used for 11 months
• Amount withdrawn at end of Month 2 → used for 10 months
• Amount withdrawn at end of Month 11 → used for 1 month
• Amount withdrawn at end of Month 12 → used for 0 months

The average comes to 5.5 months.

Interest on Drawings = Total Drawings × Rate × $\frac{\text{Average Period}}{12}$

Interest = 48,000 × $\frac{10}{100}$ × $\frac{5.5}{12}$

Interest = 48,000 × 0.10 × 0.4583

Interest = Rs. 2,200

The correct option is Option 3: 2200.