If the deed gives an interest-on-drawings rate but the withdrawal is made at the end of the year, what will be the interest period?

Correct answer: Zero period or a very short period

The governing concept is that interest on drawings accrues only for the period during which the partner’s money remains withdrawn from the firm. The period is measured from the date of withdrawal to the end of the accounting year. If the withdrawal occurs exactly at the year-end, there is no meaningful interval between withdrawal and closing date, so the interest period is zero and the interest is normally nil. A full year would apply to a withdrawal at the beginning of the year. Six months would usually apply to a middle-of-year withdrawal, while three months would require a withdrawal approximately three months before year-end. Therefore option A is correct, subject to any specific convention stated in the deed.