In profit distribution interest on capital is beneficial to whom?

Correct answer: For the partner contributing capital

Interest on capital is an amount allowed to a partner because that partner has invested capital in the firm. It is treated as a return for the use of the partner’s capital, subject to the partnership deed and applicable accounting rules. In the partner’s capital or current account, the amount is normally credited because it increases the amount due to that partner. It is not a benefit given directly to customers or creditors.

Thus option B is correct: interest on capital benefits the partner who contributes capital. The firm records it as an appropriation of profit, so it reduces the profit available for further distribution, but the direct recipient is the capital-contributing partner. The wording “credited to the partner’s account” correctly describes the accounting entry in the usual partnership treatment.