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    sid1234567890's Avatar
    sid1234567890 Posts: 2, Reputation: 1
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    #1

    Dec 3, 2009, 02:37 AM
    Interest on drawings
    What is interest on drawings?it is an income or gain for a business.
    What is the treatment of it in balance sheet?
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
    Senior Member
    		  
    #2

    Dec 5, 2009, 05:50 AM

    Interest on drawings represent the interest charged on drawings made by the partners according to the partnership agreement.

    The concept perhaps is that when a partner is entitled to interest on his capital contribution, he is also liable to be charged with interest on drawings. The idea is to restrict excessive withdrawals by parners.

    This interest is not a business income or gain. Rather it forms part of the distributable income. It is treated just opposite to interest on capital.
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