Interest on partner's drawings is recorded on _____________

Credit side of P and L appropriation A/c

The correct answer is option 2- Credit side of P and L appropriation A/c.

Interest on drawings is the amount charged to partners for withdrawing money from the firm for personal use. It is considered an income for the firm. Since the Profit and Loss Appropriation Account is used to distribute profit-related items among partners, interest on drawings is credited there.

Profit and Loss Appropriation Account is merely an extension of the Profit and Loss Account of the firm. It shows how the profits are appropriated or distributed among the partners. All adjustments in respect of partner's salary, partner's commission, interest on capital, interest on drawings, etc. are made through this account. It starts with the net profit/net loss as per Profit and Loss Account.