Concept:Interest on drawings is a charge imposed on partners for withdrawing more than the agreed amount, and it increases the partnership's distributable profit.
Explanation:Interest on drawings is meant to discourage partners from taking excessive cash out of the business.
When interest is charged, the partner's current account is debited.
This reduces the amount the partner is entitled to receive from the firm.
At the same time, the appropriation account is credited.
This makes more profit available for sharing among the partners.
It is not an expense, so it is not debited to the profit and loss account.
It is also not recorded as a current asset in the balance sheet.
Therefore, in a partnership account, interest on drawings is credited to the appropriation account.
Answer:Credited to appropriation account.