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Standard XI
Accountancy
Recording Interest on Capital & Drawings
At the year-e...
Question

At the year-end, the total interest on capital is ______ to the profit & loss account?


A

Debited

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B

Credited

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C

Not transferred

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D

None of the above

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Solution

The correct option is A

Debited


Interest on capital is an expense for the business, hence debited to profit or loss account.


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Q. If interest on capital, salary to the partner and share of profit are credited while interest on drawings, drawings and share of loss are debited to the Partners' Capital Accounts, what is the method followed to maintain the Capital Accounts?
Q.

A and B are partners sharing profits and losses in the ratio of 3 : 1. Their capitals at the end of the financial year 2016-17 were Rs 6,00,000 and Rs 3,00,000. During the year 2016-2017, A's drawings were Rs 80,000 and the drawings of B were Rs 40,000, which had been duly debited to partner's capital accounts. Profit before charging interest on capital for the year was Rs 80,000. The same had also been credited in their profit sharing ratio. B had brought additional capital of Rs 70,000 on October 1, 2016. Calculate interest on capital @ 12% p.a. for the year 2016-17.

Q. A and B are partners in a business and their capitals at the end of the year were Rs.7,00,000 and 6,00,000 respectively. Calculate their opening capitals considering the following information:
(a) Drawings of A and B for the year were Rs.75,000 and Rs.50,000 respectively.
(b) B introduced capital of Rs.1,00,000 during the year.
(c) Interest on capital credited to the Capital Accounts of A and B were Rs.15,000 and Rs.10,000 respectively.
(d) Interest on drawings debited to the Capital Accounts of A and B were Rs.7,500 and Rs.5,000 respectively.
(e) Share of loss debited to Capital Accounts was Rs.20,000 each.
Q. A and B are partners in a business and their capitals at the end of the year were Rs.7,00,000 and Rs6,00,000 respectively. Calculate their opening capitals considering the following information:
(a) Drawings of A and B for the year were Rs.75,000 and Rs.50,000 respectively.
(b) B introduced capital of Rs.1,00,000 during the year.
(c) Interest on capital credited to the Capital Accounts of A and B were Rs.15,000 and Rs.10,000 respectively.
(d) Interest on drawings debited to the Capital Accounts of A and B were Rs.7,500 and Rs.5,000 respectively.
(e) Share of profit credited to Capital Accounts was Rs.1,00,000 each.
Q. When the Interest on capital is allowed to partners, Interest on Capital Account is debited and Partner's Capital Account is credited. It is called _____________.
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