What is the treatment of Interest on Capital and Interest on drawings in accounting equation?
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Interest on Capital is a liability and Expense for the organization to pay to proprietor or partners for the use of capital in the organization.
The below are the Journal Entry :
Interest on Capital Dr.
Proprietor or partner Cr.
On the other hand Interest on Drawings is debited to proprietor or partners for withdrawing capital from business. It is revenue in nature.
The below are the Journal Entry :
Proprietor or partner Account Dr.
Interest on Drawings Account Cr.
Hope it helps.
The below are the Journal Entry :
Interest on Capital Dr.
Proprietor or partner Cr.
On the other hand Interest on Drawings is debited to proprietor or partners for withdrawing capital from business. It is revenue in nature.
The below are the Journal Entry :
Proprietor or partner Account Dr.
Interest on Drawings Account Cr.
Hope it helps.
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