What is the correct journal entry for interest on capital provided to the owner? MCQ with Answer and Explanation

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What is the correct journal entry for interest on capital provided to the owner?

A. Debit Interest on Capital, Credit Cash

B. Debit Capital, Credit Interest on Capital

C. Debit P&L Account, Credit Cash

D. Debit Interest on Capital, Credit Capital

Answer: Option D

Solution (By JKSSB Mock Tests)

Interest on capital is an expense (Debit), and it increases the owner's capital account (Credit).

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

The rule 'Debit the receiver, Credit the giver' applies to:

A. All accounts

B. Nominal accounts

C. Personal accounts

D. Real accounts

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Correct Answer: Option C

Explanation:
This rule is for personal accounts.

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Question #2

In a common-size statement, all items are expressed as percentage of:

A. Gross profit

B. Net profit

C. Total assets or total revenue

D. Capital

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Correct Answer: Option C

Explanation:
Common-size balance sheet expresses each item as % of total assets; income statement as % of net sales.

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Question #3

Which system of book-keeping is technically referred to as 'Accounting from Incomplete Records'?

A. Management Accounting

B. Accrual System

C. Single Entry System

D. Double Entry System

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Correct Answer: Option C

Explanation:
Single entry system does not maintain a complete record of the dual aspect of every transaction, leading to incomplete records.

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