The interest on partners' loans is?
...The interest on partners' loans is?
Debited in current account
Credited in profit and loss account
Debited in profit and loss account
Credited in current account
Correct answer is C
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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