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Give one reason why interest on capital is allowed to partners. - Accounts

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Question

Give one reason why interest on capital is allowed to partners.

Give Reasons
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Solution

Interest on capital is allowed to compensate partners who contribute capital in excess of what is required as per their profit-sharing ratio.

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Chapter 1: Accounting for Partnership Firms - Fundamentals - SHORT ANSWER QUESTIONS [Page 1.131]

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D. K. Goel Accountancy Volume 1 and 2 [English] Class 12 ISC
Chapter 1 Accounting for Partnership Firms - Fundamentals
SHORT ANSWER QUESTIONS | Q 40. ii. | Page 1.131
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