In a partnership account, interest on drawings is
-
A.
debited to appropriation account -
B.
credited to appropiation account -
C.
treated as an expense in profit and loss account -
D.
recorded in the balance sheet as current assets
Correct Answer: Option B
Explanation
Charging interest on drawings is a means of discouraging partners from withdrawing excessive amounts from the business. From this, it follows that interest on drawings is a debit entry in the partners’ current accounts and a credit entry in the Appropriation Account.