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.
Answer & explanation
Correct answer: option 3
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.