PRC-1 · Chapter 10 · Question 87 of 100
In a partnership, interest charged on a partner's drawings is recorded in the Profit and Loss Appropriation account as:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) An addition to the Net Profit.
Explanation
Interest on drawings acts as a penalty to the partner and an income to the partnership. It is added to the net profit, increasing the total distributable residual profit.
More Preparation of Financial Statements MCQs
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