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Standard XII
Accountancy
Question

Interest on partners capital is___________.
  1. An Expenditure
  2. An appropriation
  3. A Gain
  4. None of these

A
None of these
B
An appropriation
C
A Gain
D
An Expenditure
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Solution
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Interest on capital account is an appropriation. Appropriation means it is paid only and only if there is profit. It is not a charge and hence, will not be provided if there is loss or if there are profits will be provided only till the extent of profits.

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A and B are partners having capital of Rs. 5,000 and Rs. 6,000 respectively. Interest on capital is given @ 5% p. a. Profits for the year before the appropriation is Rs. 4.600 provide interest on capital out of profits. Interest allocated to partners is:
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Q2
Interest on capital is given from profit and loss appropriation account to a partner __________________.
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Interest on partners capital is___________.
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Q4
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Q5
When the Interest on capital is allowed to partners, Interest on Capital Account is debited and Partner's Capital Account is credited. It is called _____________.
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