Assertion (A): A and B are partners in a firm. As per partnership deed interest on drawings is to be charged @ 9% p.a. A withdrew ₹ 10,000 per month at the end of each month, and B withdrew ₹ 10,000 per quarter at the end of each quarter. The firm incurred a loss of ₹ 2,00,000. Hence, interest will not be charged on drawings. Reason (R): Interest on drawings will be charged @ 9% p.a. on ₹ 1,20,000 from A for 5.5 months and from B for 4.5 months. In the context of the above two statements, which of the following is correct?

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KollegeApply · Accepted Answer

Only (R) is correct. Explanation: Assertion (A) is incorrect because interest on drawings is charged even if the firm incurs a loss, as it is an income for the firm, not an appropriation of profit. Therefore, a loss does not exempt partners from paying interest on drawings. On the other hand, Reason (R) is correct because it accurately calculates interest using the average period method; A withdrew ₹ 10,000 per month at the end of each month (total ₹ 1,20,000), with an average period of 5.5 months, and B withdrew ₹ 10,000 quarterly at the end of each quarter (total ₹ 40,000), averaging 4.5 months. Hence, only the reason is valid.

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