A. debited in current account
B. credited in profit and loss account
C. debited in profit and loss account
D. credited in current account
Correct Answer:
Option C – debited in profit and loss account
Explanation
Interest on partners’ loan to the firm is a charge against profit. Such interest is to be allowed whether there are profit or not. So, interest as a partners’ loan is credited to his loan account and later on it is transferred to the debit of profit and loss account.
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