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Flow chart for Provisions relating to Interest on Capital/ How to understand how much interest on Capital to take?

Madhura Sagar G.

05/05/2022 0 0 View Comments

You have to undertake 3 step verification for identification of provisions relating to interest on capital:

1. Is Interest on capital a Charge in the question mentioned; YES- Take full amount of Interest on capital in the Profit and loss account.

Is Interest on capital a Charge in the question mentioned; NO- Go to the next verification step

2. Is the Partnership firm curently having Profit/Loss?; LOSS- Do not pay the interest on Capital

Is the Partnership firm curently having Profit/Loss?; PROFIT - Go to the next verification step

3. Are the Profits adequate to pay Interest on capital? YES- Pay the Interest on Capital

Are the Profits adequate to pay Interest on capital? NO- Pay the Interest on Capital in the ratio of Appropriations

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