Question

interest on capital to be allowed at @ 5% on capital of rupees 80000 journal entry​

Answer 1

Explanation:

Owners may seek a return on investment in the form of a fixed rate of interest to the extent of the amount employed by them in the business. In order to ascertain a true picture of the business’ profitability, it is a common practice to provide interest on capital. Journal entry for interest on capital includes two accounts; Capital A/c & Interest on Capital A/c