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Question

Interest on partners capital is___________.


A
An Expenditure
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B
An appropriation
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C
A Gain
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D
None of these
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Solution

The correct option is B An appropriation
Interest on capital account is an appropriation. Appropriation means it is paid only and only if there is profit. It is not a charge and hence, will not be provided if there is loss or if there are profits will be provided only till the extent of profits. 

Accountancy

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