In partnership accounting, how do we calculate and take up into the books of account INTEREST ON DRAWINGS

Interest is imposed on drawings in excess of normal requirement to discourage excessive and unhealthy withdrawal of vital funds in a partnership.

How to compute or calculate interest on drawing:

  • Interest is calculated FROM the date the amount is withdrawn TO the end of the financial year.


A partnership’s year ends on 31 st December, interest being calculated at 5% per annum.  Partner A draws $2000 on 1 st April and $3000 on 1 st July, the total interest would be as follows:

5% on $2000 for  three quarter(3/4) year = $75

5% on $3000 for one half(1/2) year=$75

Total = $150.00

Bookkeeping Double entry  for interest on drawing:

Debit: Partner A ‘s Current Account   $75

Credit:  Appropriation Account               $75

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