alleryStart learning →In the profit and loss appropriation account, interest on partners' drawings appears on the:
ADebit side, along with interest on capital
BCredit side, along with the net profit
CAssets side of the closing balance sheet
DDebit side of the profit and loss account
Answer & Solution
Correct answer: B. Credit side, along with the net profit
1. Interest on drawings is an amount due from the partner to the firm, so it increases the profit available for division.
2. The textbook states that the appropriation account is credited with net profit and interest on drawings.
3. It is debited with interest on capital, partners' salary and partners' commission.
4. The balancing figure is then transferred to the partners in their profit sharing ratio.
5. In the partner's own account the entry runs the other way, since the capital or current account is debited with interest on drawings.
_Source: TN HSC Class 12 Accountancy (Samacheer Kalvi, Govt of Tamil Nadu), Unit 3 "Accounts of Partnership Firms - Fundamentals", §3.11_
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