Question

Vijay and Rattan are partners in a firm. The partnership agreement provides for interest on drawings @ 12% per annum. Which of the following accounts will be debited to transfer interest on drawings to Profit and Loss Appropriation Account:

Options

• Interest on Drawings account

• Bank account

• Partners Current accounts

• Partners Capital accounts

Answer 1

Interest on Drawings account

Explanation:

The interest on the drawing account is transferred to the profit and loss appropriation account after being credited to it. Interest on Drawings Account is debited from the Partners Current Account (for fixed capital) or Partners Capital Account (for flexible capital).