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In the presence of an agreement, interest on capital is to be provided from _______?
- a)Profits
- b)Capital
- c)Partner’s personally
- d)None of these.
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
In the presence of an agreement, interest on capital is to be provided...
Because interest on capital is appropriation that means it should provide only when there is profits in the firm
so it is provided from profits
so it is provided from profits
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In the presence of an agreement, interest on capital is to be provided...
Interest on capital is a financial charge that is paid to the owner(s) of a business in recognition of the use of their capital. It is typically paid out of the profits of the business and is calculated as a percentage of the capital invested by the owner(s).
The amount of interest on capital that is paid and the timing of the payments are typically specified in an agreement between the owner(s) and the business. This agreement may be a written document, such as a partnership agreement or a shareholder agreement, or it may be an informal understanding between the parties.
Interest on capital is an important consideration for businesses because it represents a cost that must be accounted for in the financial statements. It is also an important consideration for the owner(s) of the business, as it represents a return on their investment in the business. In the absence of an agreement, the amount of interest on capital that is paid may be determined by the business entity assumption, which states that the business is separate and distinguishable from its owner(s) and other stakeholders.
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In the presence of an agreement, interest on capital is to be provided from _______?a)Profitsb)Capitalc)Partner’s personallyd)None of these.Correct answer is option 'A'. Can you explain this answer?
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