Question

give the entry of providing Interest on capital to partner.

Answer 1

Journal entries for Interest on Capital: interest on capital is an appropriation (setting apart) of profit. If a firm has earned profit, it will have a credit balance in the P & L Appropriation A/c. So if you have to take a part from profit and put in the partners' capital accounts, you will have to debit (reduce) P & L Appropriation A/c and credit (increase) partners' capital accounts. It can be done directly or through Interest on Capital A/c as shown below:

Interest on Capital A/c Dr.

To Partners' Capital A/cs

P & L Appropriation A/c Dr.

To Interest on Capital A/c

Answer 2

Interest on capital is an expense for the firm.
Interest on capital of partner are shown on the credit side of Partner's capital.


Entry will be.

Interest on Capital a/c. .. Dr
To Partner's capital a/c.