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Benefits of Debentures

In statement ...

Question

In statement of profit and loss interest on capital is shown as _________.

A

Addition

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B

Subtraction

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C

Ignored

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D

Multiplied

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Solution

The correct option is B Subtraction
Allowing interest on capital is an indirect expense for the business, an increase in expenses will lower the profit for the year. Hence, Interest on capital is deducted.

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Similar questions

Q. Interest on capital is given from profit and loss appropriation account to a partner __________________.

X

Y

are partners sharing profits and losses in the ratio of

2 : 3

with capitals of

R s . 2, 00, 000

R s . 1, 00, 000

respectively. Pass the necessary Journal entry or entries for distribution of profit/loss for the year ended 31st March, 2018 in each of the alternative cases:
Case 1. If Partnership Deed is silent as to the interest on capital and the profit for the year is

R s . 20, 000

.
Case 2. If Partnership Deed provides for interest on capital @

6 %

p.a. and loss for the year is

R s . 15, 000

.
Case 3. If Partnership Deed provides for-interest on capital @

6 %

p.a. and the profit for the year is

R s . 21, 000

.
Case 4. If Partnership Deed provides for interest on capital @

6 %

p.a. as a charge on profit and the profit for the year is

R s . 20, 000

.
Case 5. If Partnership Deed provides for interest on capital @

6 %

p.a. as a charge on profit and the profit for the year is

R s . 2, 000

.
Case 6. If Partnership Deed provides for interest on capital @

6 %

p.a. as a charge on profit and the profit for the year is

R s . 18, 000

Q. For interest in capital, _______________ a/c is to be debited under past adjustments through profit and loss adjustment account

Q. A Partnership Deed provides for the payment of interest on capital but there was a loss instead of profit during the year 2010-11. At what rate will the interest on capital be allowed?

Q. If the opening capital is 50,000 as on April 1, 2005 and additional capital introduced 10,000 on January 1, 2006. Interest charge on capital 10% pa. The amount of interest on capital shown in Profit and Loss account as on March 31, 2006 will be_________.

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