Question

Manoj, Dilip and Rajinder were partners in a firm sharing profits and losses in the ratio of 7 : 3 : 5. Their fixed capitals were ₹ 10,00,000, ₹ 8,00,000 and ₹ 6,00,000, respectively. The partnership deed provided for interest on partner's drawings @ 12% p.a. Which of the following accounts will be debited for charging interest on partner's drawings?

Options

• Partners' Current Account

• Profit and Loss Appropriation Account

• Interest on Drawings Account

• Profit and Loss Account

Answer 1

Partners' Current Account

Explanation:

Since the firm follows the fixed capital method, interest on drawings is deducted from the partner's Current Account, not the Capital Account.

Journal Entry:

Partner's Current A/c  ...Dr.
    To Interest on Drawings A/c