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
The correct answer is: 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.