In a partnership Profit and Loss Appropriation Account, which item is normally shown on the debit side?
Correct answer: C. Interest on partners' capital
- A. Interest on partners' drawings
- B. Share of profit transferred to partners
- C. Interest on partners' capital
- D. Commission received from partners
Explanation
Interest on partners' capital is an appropriation of profit and is debited to the Profit and Loss Appropriation Account. Interest on drawings is credited because it increases the amount available for appropriation.
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About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
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