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If drawings are ₹20,000 and interest on drawings is 5% per annum, what is the interest for one year?

Answer and explanation

Correct answer: One thousand rupees

Interest = principal × rate × time. Here principal = ₹20,000, rate = 5% = 0.05, time = 1 year. So interest = \(20,000 \times 5\% = 20,000 \times 0.05 = 1,000\) rupees. Option (D) ₹2,000 would correspond to 10% (not 5%), and (B) and (C) are clearly incorrect. Exam tip: use the formula P×R×T to compute interest quickly when rate is per annum and time is in years.

Related tags

Interest On DrawingsPartnership AccountsNumericalEasyAccountancyClass 12Profit DistributionPartnership Accounts Basic Concepts

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