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Subjects
Class 12AccountancyPartnership Accounts - Basic ConceptsProfit DistributionHardLevel 7
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If interest on partner loan is wrongly debited to Profit and Loss Appropriation Account what is the main error?

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Answer and explanation

Correct answer: A charge against profit is treated as appropriation

Interest on partner loan is an expense before calculating profit. Show it in Profit and Loss Account not Appropriation Account.

Related tags

Partner LoanChargeClassification Error

Frequently asked questions

What is the correct answer to this question?

A charge against profit is treated as appropriation

Why is this the correct answer?

Interest on partner loan is an expense before calculating profit. Show it in Profit and Loss Account not Appropriation Account.

Which subject and chapter does this question cover?

This is a Class 12 Accountancy question. Chapter: Partnership Accounts - Basic Concepts. Topic: Profit Distribution.

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10 more MCQs
  1. 1If the partnership deed says profit will first be transferred to reserve, what type of adjustment is this?
  2. 2A is guaranteed a minimum profit of rupees twenty thousand. His actual share of profit is rupees seventeen thousand. What is the deficiency?
  3. 3If the deed requires fixed capitals in which account will appropriations like salary and interest be recorded?
  4. 4The deed says interest on drawings is credited to the Profit and Loss Appropriation Account. Why is it credited?
  5. 5The deed provides a monthly salary of Rs 6,000 to partner A and equal profit sharing. Where will the annual salary appear?
  6. 6If the deed says profit will first be transferred to reserve and then shared among partners, what is the first step?
  7. 7If the deed allows A a twenty percent commission on profit before distributing the remaining profit, what is the nature of this item?
  8. 8What is the main basis of profit distribution in partnership?
  9. 9If the partnership deed does not provide profit sharing ratio how will profit be distributed?
  10. 10In which account is the salary paid to partners shown before the distribution of profits?
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