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Interest on drawings is for the business

This question belongs to Commerce Accounting
Accounting
?

Interest on drawings is ___ for the business

Answer & Solution
Correct Answer: Option C
Interest on drawings is gain for the business. Interest on drawings is an income to the firm, and hence it is credited to the profit and loss appropriation account. On the other hand, interest on drawings is an expense to the partners, and hence it is debited to their capital accounts.
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