Concept:Interest on partners’ capital is recorded in the account that shows how partnership profits are shared among partners.
Explanation:The profit and loss appropriation account is prepared specially for a partnership.
It shows the distribution of net profit among the partners.
Interest on capital is a charge against the partners’ share of profit and is debited to this account.
Net profit brought down from the profit and loss account is credited to the appropriation account.
Therefore, interest on partners’ capital is not shown in the trading account, profit and loss account, or income surplus.
It appears only in the profit and loss appropriation account.
Answer:Profit and Loss Appropriation Account.