In case partner's capital is fixed, then where interest on drawings charged will be shown?
- ADebit side of partner's capital account
- BCredit side of partner's capital account
- CDebit side of partner's current account
- DCredit side of partner's current account
Solution & Step-by-step Explanation
Under the fixed capital system, the Capital Account records only permanent structural capital introductions or withdrawals. All routine operational adjustments like interest on capital, salary, drawings, and interest on drawings are recorded in the Partner's Current Account.Since interest on drawings is an expense/deduction for a partner, it is shown on the Debit side of the Partner's Current Account.