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Home Questions BNEXR2RJNB
Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Partnership

Question:

There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the codes provided below-
Assertion: Interest on capital to a partner is payable only out of profits.
Reasoning: Interest on capital is an appropriation of profits that is required to be provided irrespective of profits and loss.

Options:

Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

Both Assertion (A) and reasoning (R) are correct and but R is not the correct explanation of A.

Assertion (A) is true but Reasoning (R) is not correct.

Assertion (A) is not true but Reasoning (R) is correct.

Correct Answer:

Assertion (A) is true but Reasoning (R) is not correct.

Explanation:

Interest on capital is an appropriation and is provided when there is profit. In case firm suffers a loss, no interest on capital, salary, remuneration is to be allowed to partners. Hence, R is false.

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