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Recording Interest on Capital & Drawings

At the year-e...

Question

At the year-end, the total interest on drawings is ____ in 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 B
Credited

Interest on drawings is an income for the business, hence credited in the profit & 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?

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

Q. When the Interest on drawings is charged to partners, Interest on Drawing Account is credited, and Partner's Capital Account is debited. It is called __________.

A

B

are partners in a business and their capitals at the end of the year were

R s . 7, 00, 000

6, 00, 000

respectively. Calculate their opening capitals considering the following information:
(a) Drawings of

A

B

for the year were

R s . 75, 000

R s . 50, 000

respectively.
(b)

B

introduced capital of

R s .1, 00, 000

during the year.
(c) Interest on capital credited to the Capital Accounts of

A

B

R s .15, 000

R s . 10, 000

respectively.
(d) Interest on drawings debited to the Capital Accounts of

A

B

R s . 7, 500

R s . 5, 000

respectively.
(e) Share of loss debited to Capital Accounts was

R s . 20, 000

A

B

are partners in a business and their capitals at the end of the year were

R s . 7, 00, 000

R s 6, 00, 000

respectively. Calculate their opening capitals considering the following information:
(a) Drawings of

A

B

for the year were

R s . 75, 000

R s . 50, 000

respectively.
(b)

B

introduced capital of

R s .1, 00, 000

during the year.
(c) Interest on capital credited to the Capital Accounts of

A

B

R s .15, 000

R s . 10, 000

respectively.
(d) Interest on drawings debited to the Capital Accounts of

A

B

R s .7, 500

R s . 5, 000

respectively.
(e) Share of profit credited to Capital Accounts was

R s . 1, 00, 000

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