Interest on capital credited to partner's current account

Steps:

• Identify interest on capital as an appropriation of profit, not a firm expense.
• Debit the appropriation account to reduce distributable profits.
• Credit the partner's current account, as capital accounts remain fixed for initial investments.
• Confirm the entry transfers the interest amount from appropriation to current.

Why B is correct:

• Per partnership accounting rules, interest on capital is debited to the profit and loss appropriation account and credited to the partner's current account to track ongoing profit shares separately from fixed capital.

Why the others are wrong:

• A: Incorrectly credits X's capital account, which should not fluctuate with profit appropriations.
• C: Reverses the entry, debiting capital and crediting appropriation, which would improperly increase capital.
• D: Debits X's current account, reducing the partner's balance instead of adding interest.

Final answer: B