Question

Mike and Ken were two partners sharing profits and losses in the ratio 4:3. Ken was in need of funds so he took a loan of Rs.50, 000 from the firm at an agreed rate of interest being 10% p.a. If Interest is charged on loan to the partner it will be:

(a) Debited to Profit and Loss A/c

(b) Credited to Profit and Loss A/c

(c) Debited to Profit and Loss Appropriation A/c

(d) Credited to Profit and Loss Appropriation A/c

Answer 1

Correct option is (b) Credited to Profit and Loss A/c

Explanation: Mike and Ken were two partners sharing profits and losses in the ratio 4:3. Ken was in need of funds so he took a loan of Rs.50, 000 from the firm at an agreed rate of interest being 10% p.a. If Interest is charged on loan to the partner it will be credited to Profit and Loss A/c