Question

Select the most appropriate alternative from those given below and rewrite the statement.

The interest on capital of a partner is credited to __________________ account.
a) trading
b) profit and loss
c) partner’s capital
d) cash

Answer 1

The interest on capital of a partner is credited to partner’s capital account.
Explanation: Interest on capital is an income for a partner. It is a kind of revenue that partners earn on the capital contributed by them in the partnership business. It leads to an increase in capital; so it is credited to Partners’ Capital Account.