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The interest on partners' loans is?

Accounts - Principles of Accounts
JAMB 2010

The interest on partners' loans is?

  • A. debited in current account
  • B. credited in profit and loss account
  • C. debited in profit and loss account
  • D. credited in current account
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Correct Answer: Option C
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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