If interest on capital is treated as interest on a loan and charged to the Profit and Loss Account, what is the main error?

Correct answer: An appropriation was treated as an expense

Under the usual partnership-accounting treatment, interest on capital is an appropriation of divisible profit, unless the agreement specifically provides otherwise. It is recorded after calculating net profit in the Profit and Loss Appropriation Account, not as an operating expense in the Profit and Loss Account. Charging it as an expense reduces net profit before appropriation and therefore gives an incorrect figure for profit available for distribution. Thus an appropriation has been wrongly treated as an expense. Option B reverses the error, while options C and D describe unrelated accounting mistakes. Therefore option A is correct.