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The partnership deed provides interest on capital but the firm has a loss. How is the interest generally treated?

Answer and explanation

Correct answer: It will not be allowed as appropriation when there is no profit

Interest on capital is generally an appropriation of profit. It is not allowed when there is no profit unless the deed treats it as a charge.

Related tags

Partnership DeedInterest On CapitalProfit AppropriationPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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