In case partner's capital is fixed, then where interest on drawings charged will be shown?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Debit side of partner’s current account
Under the fixed capital method the capital account records only capital introduced or withdrawn. Every other item between the partner and the firm — share of profit, interest on capital, drawings, interest on drawings — goes to a separate current account. Interest on drawings is an amount the partner pays to the firm, so it reduces what he is owed and is debited to his current account (and credited to the Profit and Loss Appropriation Account).
Why the other options are incorrect
Option (1) Debit side of partner’s capital account — Incorrect. This is the place under the fluctuating capital method; with fixed capitals the capital account is not touched.
Option (2) Credit side of partner’s capital account — Incorrect. Wrong account and wrong side: a credit would increase what the firm owes the partner.
Option (4) Credit side of partner’s current account — Incorrect. Right account, wrong side: the credit side carries interest on capital, salary and share of profit, which the partner earns.
NCERT (2026-27 edition): |