:★ Profit and Loss Appropriation Account➲ Interest on capital is shown in the Profit and Loss Appropriation Account.___________________________________________________________EXPLANATION :❒ Interest on Capital :- ✎ Interest on capital is the amount which is paid to the partners of a firm for contributing capital to it. Though the Indian Partnership Act, 1932 does not LAY down any provision for allowing interest on partners' capital; however if the partners AGREED in the partnership deed, the same may be allowed. ✎ According to Section 13(c) of the Partnership Act, where interest on capital is payable; it can be paid only out of profit. So, when the BUSINESS has resulted into a loss, no interest on profit will be allowed even if there is a provision for the same in the partnership deed. ✎ Where the partners of a firm agree that interest will be allowed on the capitals at an agreed rate; before ascertaining the amount of divisible profit, the amount of interest on capital is deducted from the divisible profit before distributing the amount in their profit sharing ratio.✎ Interest paid on capital is debited to Profit and Loss Appropriation Account as it is a part of appropriation of profit. Again, the respective accounts of the partners are CREDITED it is gain for them.