Question

Where will you record interest on drawings?

• A. Debit side of Profit & Loss Appropriation Account.
• B. Credit side of Profit & Loss Appropriation Account.
• C. Credit side of Profit & Loss Account.
• D. Debit side of Capital/Current Account only.

Answer 1

Answer: (B)

Interest on drawings will be shown on the credit side of the profit and loss appropriation account. Interest on drawings is the interest charged by the firm on the drawings made by the partners. It is a source of income for the firm and hence, it is to be credited to profit and loss appropriation account.