A. debited to appropriation account
B. credited to appropriation account
C. treated as an expense in profit and loss account
D. recorded in the balance sheet as current assets
Correct Answer:
Option B – treated as an expense in profit and loss account
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.
