Practicing Success
Which account is debited for charging interest on partners drawings by the partnership firm, while preparing profit and loss appropriation account? |
Partners Current A/c Partners' Capital A/c Either option 1 or 2 Interest on Drawings A/c |
Either option 1 or 2 |
The correct answer is option 3- Either option 1 or 2. The journal entries passed for charging Interest on Drawings are as follows- (a) For charging interest on drawings to partners’ capital accounts: (b) For transferring interest on drawings to Profit and Loss Appropriation Account: * A combined entry may be passed for the above two journal entry for charging interest on drawings to partners’ capital accounts. The journal entry is: * It will be capital account or current account; it depends on the method which firm follows for maintaining capital accounts of partners. |