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JAMB Principles of Accounts 2013 Question 35

Question 35

Partnership Accounts

In a partnership account, interest on drawings is

  1. A.debited to appropriation account.
  2. B.credited to appropriation account.
  3. C.treated as an expense in profit and loss account.
  4. D.recorded in the balance sheet as current assets.
Show the answer and explanation

Answer: B (credited to appropriation account.)

Explanation

Interest charged on drawings is income to the firm, so it is credited (added) in the appropriation account.