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 partners’ drawings @ 12% p.a. Which of the following accounts will be debited for charging interest on partners’ drawings ?

• A. Partners’ Capital Account
• B. Profit and Loss Appropriation Account
• C. Interest on Drawings Account
• D. Profit and Loss Account

Hint:

Interest on drawings → income for firm → goes to P and L Appropriation A/c.

Answer 1

The Correct Option is B

Interest on drawings is considered revenue for the company, and it is recorded as a credit in the Profit and Loss Appropriation Account. Therefore, this account is debited to reflect the charge.