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JAMB Principles of Accounts 2006 Question 37

Question 37

Partnership Accounts

Interest on the drawings of partners is treated in the

  1. A.profit and loss appropriation account
  2. B.goodwill account
  3. C.profit and loss account
  4. D.trading account.
Show the answer and explanation

Answer: A (profit and loss appropriation account)

Explanation

Interest on drawings is an appropriation item: it is added to the profit to be shared in the P&L appropriation account.