Pass journal entry for interest on drawings
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Interest on drawings is an income for the business, So interest on drawings account is credited. Interest on drawings is not received in cash, but debited to drawings or Capital account.
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Cash or Goods withdrawn by a proprietor from the business for their personal use is labelled as drawings. Interest may be charged by the business at a fixed rate when a business owner draws funds or assets. Journal entry for interest on drawings includes two accounts; Drawings A/C & Interest on Drawings A/C.
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