There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the codes provided below-
Assertion: In order to compensate a partner for contributing capital to the firm in excess of the profit-sharing ratio, the firm pays interest on the partner’s capital.
Reasoning: Interest on capital is treated as a charge against profit.

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

No interest is allowed on partners’ capitals unless it is expressly agreed among the partners. When the Deed specifically provides for it, interest on capital is credited to the partners at the agreed rate with reference to the time period for which the capital remained in business during a financial year. Interest on capital is generally provided for in two situations:
(i) when the partners contribute unequal amounts of capitals but share profits equally, and
(ii) where the capital contribution is same but profit sharing is unequal. Interest on capital is calculated with due allowance for any addition or withdrawal of capital during the accounting period.
Thus, Assertion is True. However, interest on capital is treated as appropriation. Thus Assertion is false.