Assertion (A): Interest charged on drawings is debited to Profit and Loss Appropriation Account.
Assertion (A): Interest charged on drawings is debited to Profit and Loss Appropriation Account.
Reason (R): Interest on drawings is charged even if the Partnership Deed does not provide.
In the context of the above two statements, which of the following is correct?
a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A).
b) Both Assertion (a) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).
c) Assertion (A) is correct but the Reason (R) is not correct.
d) Both Assertion (A) and Reason (R) are incorrect.
Anurag Pathak Changed status to publish April 15, 2023
Ans – d)
Interest Charged on drawings is the income to the firm. Thus it is credited to Profit and Loss Appropriation Account.
Thus Assertion (A) is incorrect.
Interest on drawings is not charged If Partnership does not exist or there is no provision of interest on drawings in the partnership deed.
Interest on drawings is charged in when the rate of interest is agreed upon in the Partnership deed.
Thus Reason (R) is also incorrect.
Anurag Pathak Changed status to publish April 4, 2023
