Question

What is effect of interest charged on capital on accounting system​

Answer 1

The amount of interest charged on capital is an indirect expense of the business and on the other hand, it is an income of the owner. Interest on Capital has the following two effects on final accounts: It is an expense of the business, therefore; it will be recorded on the debit side of Profit and Loss Account.

Answer 2

The amount of interest charged on capital is an indirect expense of the business and on the other hand, it is an income of the owner. Interest on Capital has the following two effects on final accounts: It is an expense of the business, therefore; it will be recorded on the debit side of Profit and Loss Account.