In case of a Fixed Capital Account framework, Interest on Drawings is:
- ADebited to capital account.
- BCredited to capital accounts.
- CDebited to current account.
- DCredited to current account.
Solution & Step-by-step Explanation
Under the fixed capital method, the balance in the Partner's Capital Account remains constant unless additional capital is introduced or permanent withdrawal of capital occurs. All regular adjustments, such as interest on drawings, salary, and profit shares, are routed through the Partner's Current Account. Since interest on drawings reduces the partner's equity balance, it is debited to the Partner's Current Account.