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State Whether the Following Statement is True Or False. - Book Keeping and Accountancy

MCQ

State whether the following statement is True or False.

The interest on drawings is an income of the firm.

Options

  • True

  • False

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Solution

True

Explanation: While interest on drawings is an income of the firm, it is an expense for the proprietor. As all the transactions are recorded from the business perspective, interest on drawings is recorded on the credit side of the Profit and Loss Account.

Concept: Adjustments - Interest on Capital, Drawings and Loans
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