Hello EK,
Here is an explanation to your question:
These two questions are related and touch on how you account for different items in a partnership.
First thing to understand is the role or use of an appropriation account in a partnership. Here is a simple explanation;
"An appropriation account is a special account prepared to show the distribution of profits/losses among the partners" and it is prepared after preparing P&L account. It's actually an extension of P&L.
Question1: Only two items should appear as deductions in the appropriations account; interest on capital and partner's salary.
Interest on loan should appear in the P&L as it affects the NET profit for the partnership.
Drawings do not appear anywhere in the appropriation account. Instead, debit partners' current account and credit drawings account. However, INTEREST on drawings appear as a credit in the appropriation account.
Thus, based on the choices given, the correct answer is indeed C.
Question 2: When sharing profits in a partnership, salaries, interest on capital, interest on drawings and residual profit are credited in the respective partner's current account. However, there are some author's who state that interest on capital should be credited to a partner's capital account.
So, based on the figures given, Quan's current account was credited with $10,300 computed as follows;
Interest on capital: 50,000*0.03 = 1,500
Annual Salary = 6,000
Profit share: (18,900-4500-6000)/3=2,800
So, total: 1,500 + 6,000 + 2,800 = 10,300
NB: before computing the profit share for each partner, you should deduct the total interest on capital for both partners ($4,500) and Quan's salary ($6,000). So the residual profit share is $8,400 ($18,900-4,500-6,000), from which Quan's share is $2,800 ($8,400/3).
I hope that answers your question.