What Is Interest on Drawings?

Interest on drawing is an income for the firm and is payable by the partners to the firm hence, is deducted/debited. Interest is charge on the money/goods taken by the partners for their personal use during the year.

What is interest on drawings Mcq?

Interest on drawings is an income to the firm, and hence it is credited to the profit and loss appropriation account. On the other hand, interest on drawings is an expense to the partners, and hence it is debited to their capital accounts.

Why is interest charged on drawings?

Accounting and Journal Entry for Interest on Drawings

Interest may be charged by the business at a fixed rate when a business owner draws funds or assets. ... Interest on drawings is an income for the business, hence, it is added to the interest account of the firm thereby increasing the total income of the business.