Question

In Statement of profit or loss interest on Capital in shown as ________. (Fill in the blank by choosing correct option)
(a) addition
(b) subtraction
(c) ignored
(d) multiplied

Answer 1

IT SHOWS IN CR SIDE OF PROFIT AND LOSS AC

Answer 2

Answer:

Explanation:

In Statement of profit or loss interest on Capital in shown as a subtraction.

Interest on capital is an expense to the firm and is always debited to the profit and loss appropriation account. The interest is payable to the partners and therefore, the partner's capital account is credited with the amount of interest.

Capital interest is an expense for the business and is added to the proprietor's capital thereby increasing its total business capital. It's not paid by the bank or in cash.