Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Partnership

Question:

Interest on Capital is allowed on which capital to a partner in a partnership firm?

Options:

Average capital

Opening capital

Closing capital

Capital remain invested in the business

Correct Answer:

Capital remain invested in the business

Explanation:

The correct answer is option 4- Capital remain invested in the business.

Interest on capital is to be calculated on the capitals at the beginning for the relevant period. If there is any additional capital introduced or capital withdrawn during the year, it will cause change in the capitals and interest is to be calculated proportionately on the changed capitals for the relevant period.