when interest is to be allowed on the capitals of the partners it is calculated on the :
(a) average capital
(b) capital at the end less drawing if any
(c) capital in the beginning of the year
(d) at the end of the year
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Interest on partners capital will be debited to
Interest on capital is an expense to the firm and is debited to the profit and loss appropriation account. Interest is payable to the partners and hence, the partner's capital account is credited with the amount of interest. In case of loss, no interest will be allowed on capital.
Explanation:
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