There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the codes provided below-
Assertion (A): Interest on capital to a partner is payable only out of profits.
Reason (R): Interest on capital is an appropriation of profits that is required to be provided irrespective of profits and loss.
Answer & explanation
Correct answer: option 3
The correct answer is option 3- A is true but R is false.
Assertion (A): Interest on capital to a partner is payable only out of profits. This is true. Interest on capital is an appropriation and is provided when there is profit.
Reason (R): Interest on capital is an appropriation of profits that is required to be provided irrespective of profits and loss. This is false. It is an appropriation of profit but provided only if firm earns profit. In case of loss no interest on capital is provided.