INTEREST ON DRAWING

Interest on Drawings – Cash or Goods withdrawn by the Businessman for his personal use from the business is called Drawings. In Such a case, Interest is charged on such drawings from the Businessman. Interest on drawings is an income for the business, So interest on drawings account is credited

How do you calculate interest on a drawing?

Similarly Interest can be calculated by following formulas: Half yearly Drawings for year when: Drawings are made in the begnning of each period (halfyear) interest on drawing = Amount x Rate/100 x 9/12. Drawings are made in the middle of each period (half year) interes on drawing = Amount x Rate/100 x 6/12.

Is it compulsory to charge interest on drawings?

The amount is not returned to business till the end of the accounting period; December 31, 2016. The interest on drawings is to be charged @ 10% p.a. What adjusting entry should be made to record the interest on drawings at the end of the accounting period.