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SSC Financial and Cost Accounting P-1 QUESTION #6143
Question 1

What is the correct accounting entry for interest on capital for partner X?

OptionAccount DebitedAccount Credited
AAppropriationX's capital account
BAppropriationX's current account
CX's capital accountAppropriation
DX's current accountAppropriation
  • Option A
  • Option B✔️
  • Option C
  • Option D
Correct Answer Explanation

Option B is correct.

  • Debit: Appropriation account — reduces profit available for sharing.
  • Credit: X's current account — increases the partner's entitlement.

Capital accounts hold fixed capital contributions. Interest on capital, drawings, and profit shares pass through the current account.