The interest on partner's drawings is debited to __________________while charging interest on drawings on drawings made by the partner.
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Partner's Capital Account
The following journal entry is made-
Partners Capital/Current A/c’s (individually) Dr.
To Interest on Drawings A/c
(Being interest charged on drawings)
The purpose of this entry is to properly allocate the interest charged on the partner's drawings. By debiting the partner's Capital or Current Account, you're showing that their capital is being adjusted due to the interest charged on their drawings. The credit to the "Interest on Drawings Account" records the interest amount as income for the business.