If interest on capital of Rs 18,000 should have been debited in the Appropriation Account but was omitted, what is the effect on distributable profit?

Correct answer: Distributable profit will be overstated by Rs 18,000

The governing concept is the treatment of interest on capital in the Profit and Loss Appropriation Account. Interest on capital is an appropriation of profit and must be debited before the remaining profit is distributed among partners. If the required debit of Rs 18,000 is omitted, the accounting record does not reduce profit by that amount. Consequently, the profit available for distribution appears Rs 18,000 higher than it should be. Thus option A is correct. Option B reverses the direction of the error, option C ignores the omitted debit, and option D has no logical connection with the amount of the omission.