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Recording Interest on Capital & Drawings

What is the n...

Question

What is the nature of Interest on drawings account?

A

Asset

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B

Income

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C

Expense

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D

Liability

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Solution

The correct option is B
Income

Interest on drawings is an income for the business.

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Similar questions

Q. State whether the following statement are True or False.

The interest on drawings is an income of the firm.

Q. State whether the following statements are True or False.

The interest on drawings is an income of the partnership firm.

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

The interest on drawings is transferred to__________________ side of partner’s current account.
a) debit
b) credit
c) asset
d) liability

Q. X and Y are partners sharing profit and loss at the ratio of 1/3 and 2/3 respectively. The net income for this accounting period is Rs 10,000 while salary of X = Rs 2,000, interest on Y's drawings = Rs 3,000 and interest on X's capital = Rs 2,000. What is the X's share of profit or loss after the adjustment for partner's salary, interest on capital and interest on drawings?

Q. Calculate operating profit:
operating revenue = Rs. 10,000,000; COGS = Rs. 4,000,000; general and administrative expenses = Rs. 3,000,000; interest expense= Rs. 4,000,000; and income taxes = 900,000.

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