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If interest on A's capital is Rs. 2,000, what happens in A's account?

Answer and explanation

Correct answer: A account will be credited

The accounting entry is: Interest on capital (expense/appropriation) Dr. Rs.2,000; A's capital/current account Cr. Rs.2,000. Therefore A's account is credited. Option D correctly states that the interest expense/appropriation is debited, but that addresses the expense side — it does not answer what happens in A's account. Exam tip: Interest on capital is an appropriation of profit and is always credited to the partner's capital or current account.

Related tags

Partnership AccountsInterest On CapitalCapital AccountAccounting EntriesProfit DistributionPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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