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.
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 but 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) is false but Reason (R) is true
Correct Answer: Assertion (A) is true but Reason (R) is false
Solution : 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. Interest on capital is treated as an appropriation of profit. Hence, the correct option is 3.
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): 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.
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: Physical capital is tangible in nature Reason: Physical capital can be seen and touchable.
Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile