Read the following information and answer the questions :

A and B entered into partnership to supply stationery items without any terms and conditions. A contributed ₹ 1,00,000 as capital while B contributed 20,000 only but he allow his building to be used as the firm office. After running business for nearly nine months they felt urgency of funds and same was fulfilled by B by providing ₹ 80,000 as loan to the firm. At the end of the accounting year, they made a profit of ₹50,000. They decide to expand their business in future by admitting C into the firm and also to make agreement in writing containing all the terms and conditions. 

Select out of the following that is charge against profit.

Interest on partner's loan

The correct answer is Option 4- Interest on partner's loan.

Interest on partner's loan is charge against profits and is debited to Profit and Loss account. Interest on partner's loan is provided @ 6%p.a. in absence of any agreement.