Interest on drawing in sole proprietorship

By Capital/Profits a/c

To Bank a/c

(Being owner withdrawn cash from business capital or profits which is lying in the bank)

By Owner debtor a/c

To Interest on drawings

(Cash paid by owner as interest to business for borrowing capital)

By Bank a/c

To Debtor a/c 

(Principle returned by the owner)

By Bank a/c

To Capital a/c

(This is to reconcile capital account after the cash is received)

There is a concept called as business entity concept. It’s job is to separate owner transactions from business transactions. So this loan is owner transaction. Hence the company is charging him interest so that he will not frequently borrow from profits. Because company need cash to operate. 

YES he has to repay because it is a loan

You are also correct. This is compulsory for partnerships. Since you own everything in sole proprietorship, maybe you can draw without interest. However, I am not too deep into Company laws and I just guessed that money must be maintained without using. If drawing is the way of salary, no problem. But what if the owner uses up all the cash and brings problems to creditors. Even if he gets bankrupted, he cannot pay everyone. In this wake, I imagined that if interest is imposed, drawings will be less. I dont know what sections deal with minimum capital criteria 

Yes, proprietor draws salary just like employee draws salary.