Question

CU . 18. Interest on Calls in Arrears Account is closed by (A) Crediting it to Statement of Profit & Loss. (B) Crediting it to Profit & Loss Appropriation Account (C) Debiting it to Profit & Loss Appropriation Account. (D) Debiting it to Statement of Profit & Loss.​

Answer 1

Answer:

crediting it to statement of profit and loss

Answer 2

(C) Debited Profit and Loss Appropriation Account. is correct

Explanation:

• Profit and Loss Appropriation Account is opened to show the distribution of net profits among the partners. It is an extension of profit and loss account.

• Profit and Loss Appropriation Account is debited from those items which are appropriation of profits. Appropriation of profit is the distribution of net profit. Interest on loan by partner is also appropriation of profit. So, it is debited to Profit and Loss Appropriation Account.

• As we know that a partnership is one where two or more persons work together and distribute all the profits and losses among themselves. But how exactly will this distribution of profits happen? Let us look at the implications of accounting entries and distribution of profit.