Interest on drawings
Interest on drawings is an agreed charge to a partner for withdrawing funds during the period. Debit that partner’s current account and include the amount in the appropriation calculation before sharing the residual result. Calculate it using the drawing amounts, dates and agreed rate. The charge reallocates the partners’ interests; it is distinct from the drawings themselves.
Worked example
A draws $6,000 on 1 July in a 31 December year end. At 10% annually, interest is $6,000 × 10% × 6/12 = $300.
Common mistake
Do not charge a full year’s interest on a mid-year withdrawal unless the agreement or question expressly requires that convention.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | K1 | Direct | July 2027–August 2028 |
Related terms
Also called: Partnership drawings interest