Question

Read the following text and answer the given question:

A and B are partners having fixed Capitals of ₹ 3,00,000 and ₹ 2,00,000 on 1st April 2023. They are allowed interest on Capitals @ 8% p.a. and are charged interest on drawings @ 10% p.a. During the year, A withdrew ₹ 5,000 per month in the beginning of every month, whereas B withdrew ₹ 15,000 per quarter at the end of every quarter.  The profits for the year ended 31st March, 2024, before the above mentioned adjustments were ₹ 1,34,500.

Interest on Capital will be recorded ______.

विकल्प

• On the Credit side of Capital Accounts

• On the Credit side of Profit & Loss Appropriation Account

• On the Credit side of Current Accounts

• On the Debit side of Current Accounts

Answer 1

Interest on Capital will be recorded on the Credit side of Current Accounts.

Explanation:

Interest on Capital is an appropriation of profit.

Profit & Loss Appropriation A/c   ...Dr.
        To Partners' Current A/c (or Capital A/c if capitals are fluctuating)

Since the partners have fixed capitals, interest is credited to Current Accounts.