Calculation of Drawings

under Product Method

Product Method
Under the Product Method, interest is calculated
on the total product of the various drawings
made by a partner during the accounting period
at the specified rate of interest for one unit of
outstanding period, say a month.
Steps-1 Calculation of Total Product

Product=Amount of each drawings X Outstanding

Months.
Step-2 Calculation of Interest on Drawings
Interest = Total Product X Rate of Interest X 1/12
Raju and Amar are partners in a firm. Amar drew regularly Rs. 1,500
at the beginning of every month during the year ending 31st
December 2019.
Calculate interest on Amar’s drawings @6% per annum under
product method.
 Calculation of Interest on Drawings under Product Method
Date Amount Months Product
(Amt. in Rs.) (Amt. in Rs.)
01-01-2019 1,500 12 1,500X12=18,000
01-02-2019 1,500 11 1,500X11=16,500
01-03-2019 1,500 10 1,500X10=15,000
01-04-2019 1,500 09 1,500X09=13,500
01-05-2019 1,500 08 1,500X08=12,000
01-06-2019 1,500 07 1,500X07=10,500
01-07-2019 1,500 06 1,500X06= 9,000
01-08-2019 1,500 05 1,500X05= 7,500
01-09-2019 1,500 04 1,500X04= 6,000
01-10-2019 1,500 03 1,500X03= 4,500
01-11-2019 1,500 02 1,500X02= 3,000
01-12-2019 1,500 01 1,500X01= 1,500
Total Product = 1,17,000
1
Interest on Drawings = Total Products X Rate of Interest X
12
6 1
= Rs. 1,17,000 X X
100 12
= Rs. 585
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