Question

Distinguish between drawings against profit and drawings against capital.

Answer 1

Sr. No.	Basis of distinction	Drawings against profit	Drawings against capital
1.	Part	It is a part of expected profit.	It is a part of capital (i.e., capital withdrawn).
2.	Where debited	It is debited to the drawings account.	It is debited to the capital account.
3.	Effect on capital	It does not reduce capital.	It reduces capital.
4.	Interest on drawings	It is considered while calculating interest on drawings.	It is not considered while calculating interest on drawings.
5.	Interest on capital	It is not considered while calculating interest on capital.	It is considered while calculating interest on capital.