In a partnership firm, the partners are discussing the

treatment of accrued but unpaid interest on partners'

capital. The partnership agreement specifies that

interest on partners' capital is to be provided at a certain

rate.

Which of the following statements correctly describes

the treatment of accrued interest on partners' capital in

the financial statements?

a$)$ Accrued interest on partners' capital is shown as an

expense in the Statement of Profit and Loss and

reduces the net profit of the firm.

b$)$ Accrued interest on partners' capital is shown as a

liability in the Balance Sheet, and it increases the

total capital of the firm.

c$)$ Accrued interest on partners' capital is shown as an

asset in the Balance Sheet and increases the firm's

equity.

d$)$ Accrued interest on partners' capital is ignored and

not recorded in the financial statements of the firm.