Advertisements
Advertisements
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 ______.
Options
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
Advertisements
Solution
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.
