Why Interest on Drawings Is Credited?

Interest on drawings is credited to Profit and Loss Account. It is an expense for the partner as he has to pay interest on drawings. ... Hence as for the firm interest on drawings is an income, it will be credited to Profit and Loss Account.

Why is interest on drawings credited to profit and loss appropriation account?

Interest on drawings is gain for the business. 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.

Is interest on drawings a charge?

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. In common scenarios where interest on capital is charged by the owner, interest on drawings is also charged by the business.