Interest on drawings is deducted fromChoose one optionCapital A/cExpense A/cIncome A/cOther liability A/c
Question
Interest on drawings is deducted from
Choose one option
- Capital A/c
- Expense A/c
- Income A/c
- Other liability A/c
Solution
The correct answer is Capital A/c.
Here's why:
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Drawings refer to the money withdrawn by the owner of the business for personal use. It reduces the owner's equity in the business.
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Interest on drawings is the amount charged on the owner for withdrawing money from the business. It is considered as an income for the business and a loss for the owner.
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Therefore, the interest on drawings is deducted from the Capital Account (Capital A/c) because it reduces the owner's equity in the business.
So, it is not deducted from Expense A/c, Income A/c, or Other liability A/c.
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