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easyMCQCUET Accountancy2026Accountancy
1 mark

The correct journal entry for transferring interest on capital to the Profit and Loss Appropriation Account is:

  1. A
    Profit and Loss Appropriation A/c Dr. To Interest on Capital A/c
  2. B
    Interest on Capital A/c Dr. To Partner's Capital/Current A/cs
  3. C
    Interest on Capital A/c Dr. To Profit and Loss Appropriation A/c
  4. D
    Partners Capital/Current A/c's Dr. To Interest on Capital A/c

Solution & Step-by-step Explanation

The ledger tracking of interest on capital involves two distinct stages:Provision/Crediting Partners: Closure/Transfer to Appropriation: To close the temporary interest account, it is transferred to the appropriation account as an allocation of profit.


Hence, option A is the correct transfer entry.

Practice this question

Try it yourself before checking the explanation above.

The correct journal entry for transferring interest on capital to the Profit and Loss Appropriation Account is:
A
Profit and Loss Appropriation A/c Dr. To Interest on Capital A/c
B
Interest on Capital A/c Dr. To Partner's Capital/Current A/cs
C
Interest on Capital A/c Dr. To Profit and Loss Appropriation A/c
D
Partners Capital/Current A/c's Dr. To Interest on Capital A/c

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