Question

what is the treatment of interest on capital when a firm incurs a loss​

Answer 1

Answer:

Interest on capital is that amount which any partner receives at the end of financial year beacuse of his capital being invested in business. Moreover, interest on capital is not charge on profits, that is, interest is based on the profits earned by business in that year.

Interest on capital is given to partners only when it is mentioned in the partnership deed or agreement and if the company has earned any profit in the respective year.

If there is any loss in the business, interest on capital will not be provided to partners.

Explanation:

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