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JAMB Principles of Accounts 1995 Question 34

Question 34

Partnership Accounts

Interest on a partner's drawings is debited to the

  1. A.partner's current account and credited to the profit and loss appropriation account
  2. B.profit and loss appropriation account and credited to the partner's current account
  3. C.profit and loss account and credited to the partner's current account
  4. D.partner's current account and credited to the profit and loss account.
Show the answer and explanation

Answer: A (partner's current account and credited to the profit and loss appropriation account)

Explanation

Interest on drawings is a charge on the partner, so his current account is debited, and it adds to profit to share, so the appropriation account is credited.