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Question
The interest on drawings is transferred to ___________ side of the profit and loss account.
(a) debit
(b) credit
(c) asset
(d) liability
(b) credit
(c) asset
(d) liability
Solution
The interest on drawings is transferred to the credit side of the profit and loss account.
Explanation: Interest on drawings is a gain for the business and an expense for the proprietor. Since accounting records are maintained from a business point of view, it is credited to the Profit and Loss Account.
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Effects of Adjustments-Drawings
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