M draws Rs. 20,000 per month at the beginning of each month for 12 months.
Total drawings for the year = Rs. 20,000 × 12 = Rs. 2,40,000
Since drawings are made at the beginning of each month, each drawing earns interest for different periods:
- January drawing → interest for 12 months
- February drawing → interest for 11 months
- March drawing → interest for 10 months
- ... and so on
- December drawing → interest for 1 month
For equal monthly drawings at the beginning of each month, the average time period = 6.5 months
This is calculated as: (12+11+10+...+1)÷12=78÷12=6.5 months
Interest on drawings = Total Drawings × Rate × 12Average Period
Interest = 2,40,000 × 10012 × 126.5
Interest = 2,40,000 × 0.065
Interest = Rs. 15,600
Note: If drawings were made at the end of each month, the average period would be 5.5 months instead of 6.5 months.