Question

Select the most appropriate alternative from those given below and rewrite the statement.

The interest on drawings is transferred to _________________ side of the profit and loss account.

Options

• debit

• credit

• asset

• liability

Answer 1

The interest on drawings is transferred to credit side of the profit and loss account.

Explanation: Interest on drawings is a gain for the business and an expense for the proprietor. Since accounting records are maintained from a business point of view, it is credited to the Profit and Loss Account.