Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Partnership

Question:

Interest on capital will be paid to the partners if provided for in the partnership deed but only out of which source?

Options:

Goodwill

Reserves

Profits

All of above

Correct Answer:

Profits

Explanation:

Interest on capital will be paid to the partners if provided for in the agreement but only from profits. Interest on capital is an appropriation and not a charge against profit hence, is provided only to the extent of profits.