Interest on the capital of a partner is a
Interest on the capital of a partner is a
a) Loss to the firm
b) Gain (Profit) to the firm
c) Neither loss nor gain to the firm
d) Loss to the partner
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Ans – c)
Explanation:-
interest on the partner’s capital is only an expense to the firm. Just an expense is neither a loss nor a profit to the firm. If the Revenue of the firm is greater than the total expenses. The firm is in the profit.
On the other hand, the total expenses of the firm are more than the total revenue. The firm incurs losses.
Thus only a single expense such as Interest on capital is neither a loss nor profit to the firm.
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