Question : Assertion (A): A partner's interest on capital is paid only from profits. Reason (R): Interest on capital is a profit appropriation that must be provided regardless of profit or loss.
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
Option 3: Assertion (A) is true but Reason (R) is False
Option 4: Assertion (A) if false and Reason (R) is true
Correct Answer: Assertion (A) is true but Reason (R) is False
Solution : Interest on capital is an appropriaton and is provided when there is pro fit if no further information is given.
Hence the Correct answer is option 3.
Question : Assertion (A) : Profit and Loss Appropriation account shows the correct profit earned by the firm.
Reason (R) : The net Profit adjusted after takin into account the interest on capital, Interest on drawings, Salaries/ Commission Paid
Question : Assertion (A): A partner's salary is deducted from the profit and loss account.
Reason (R): A partner's salary is a appropriation of profit.
Question : Assertion (A): In order to make up for the partner's capital contribution that exceeds the profit-sharing ratio, the company pays interest on his capital.
Reason (R): Interest on capital is a charge against profit.
Question : Assertion (A): In order to compensate a partner for contributing capital to the firm in excess of the profit-sharing ratio, the firm pays such interest on the partner's capital. Reason (R): Interest on capital is treated as a charge against profit.
Question : Assertion (A): Rent paid to a partner is transferred to the debit of the profit and loss account but not to the debit of the profit and loss appropriation account. Reason (R): Rent paid to a partner is a cost that is deducted from profits rather than being appropriated
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