Question

For the firm, interest on partner’s drawings is a/an:

• A. Expenditure
• B. Income
• C. Loss
• D. Receipt

Hint:

Interest on drawings = Income for the firm; Interest on capital = Expense for the firm.

Answer 1

The Correct Option is B

Step 1: Meaning of drawings.
Drawings mean the amount withdrawn by partners for personal use from the firm.
Step 2: Interest on drawings.
When partners withdraw money, they must pay interest to the firm. This interest is an earning for the firm.
Step 3: Accounting treatment.
Interest on drawings is recorded as income for the firm and credited to Profit and Loss Appropriation Account.
Step 4: Conclude.
Thus, interest on drawings is treated as income for the firm.
Final Answer: \[ \boxed{\text{Income}} \]