Partner Accounts

Realisation account gives the result of assets and liabilities. Its profit or loss is then transferred to capital accounts.

Under fixed capital method, current account balance is transferred to capital account at the end. This makes final settlement easy.

A partner's loan is treated like a liability of the firm and paid separately from capital. Do not mix loan and capital in exams.

Realisation profit increases capital, so partners' capital accounts are credited. Distribute it in the profit sharing ratio.

Realisation loss reduces capital, so capital accounts are debited. Loss is also shared in the profit sharing ratio.

General reserve is an accumulated profit, so it is credited to capital accounts. It is shared in the profit sharing ratio.

The governing concept is the treatment of accumulated profits at the time of dissolution. A credit balance in the Profit and Loss Account represents undistributed or accumulated profit belonging to the partners. It is transferred to the partners’ capital accounts on the credit side in their agreed profit-sharing ratio, because that ratio determines their entitlement to partnership profits. Therefore option A is correct. It is not debited, since the balance is a benefit rather than a loss. The capital ratio is relevant only when a separate agreement or rule specifically requires it, and “cash ratio” is not the normal basis for distributing accumulated profit. Equal distribution is also incorrect unless the partners share profits equally.

Debit balance of profit and loss account is accumulated loss. Debit it to capital accounts in the profit sharing ratio.

If reserve remains after liability, the surplus is treated as accumulated profit. Share it in the profit sharing ratio.

The partner taking an asset receives value from the firm, so his capital account is debited. Record the agreed value.

By taking a liability, the partner reduces the firm's burden, so his capital account is credited. Credit the partner who assumes the liability.

Expenses paid by the firm are recorded in realisation account. Their effect reaches capital accounts through profit or loss.

The partner paid for the firm, so the firm owes him. Therefore his capital account is credited.

The governing concept is the accounting treatment of remuneration payable to a partner for services rendered during dissolution. Such remuneration is an income or benefit due to that partner under the dissolution arrangement. It is therefore credited to the partner’s capital account, increasing the amount ultimately payable to him. Option A is correct. The firm may record the corresponding payment or adjustment separately, but from the partner’s perspective the remuneration is credited, not debited. A debit would represent a charge against the partner, which is the opposite treatment. It is not an asset because the amount is a settlement-related benefit payable to the partner, and it cannot be ignored because it changes his capital balance.

Drawings are amounts withdrawn by a partner, so they reduce capital. Transfer them to the debit side of capital account.

Salary payable to a partner is his receivable, so capital account is credited. Identify such dues before final settlement.

Interest due on a partner’s capital is an amount payable to the partner, so it is credited to the partner’s capital account. At dissolution, it is recorded on the credit side and included in the total amount payable to the partner. It is not recorded in the Realisation Account because it does not arise from the realisation of assets or settlement of liabilities. Exam tip: Amounts payable to a partner are generally credited to the partner’s capital account.

Interest on drawings is recoverable from the partner, so his capital account is debited. Treat it as an amount due from the partner.

The governing concept is that a realisation profit on dissolution is transferred to the partners’ Capital Accounts in their agreed profit-sharing ratio. The total ratio is 3 + 2 = 5 parts. A’s share is 3/5 of the total profit. Therefore, A’s share = ₹50,000 × 3/5 = ₹30,000. Since this is a profit, A’s Capital Account is credited, increasing the amount payable to A. Option B represents B’s 2/5 share, ₹20,000; option C incorrectly divides the profit into equal halves; and option D gives the entire profit to A instead of applying the ratio. Hence, option A is correct.

In equal ratio, Kh's share is one-half, so loss is nine thousand rupees. Record loss on the debit side of capital account.

The third partner's share is one-fifth, so he receives five thousand rupees. Distribute reserve in the profit sharing ratio.

The direct answer is option A, ₹12000. When a partner takes over an asset on dissolution, the partner assumes that asset personally, so the agreed value of the asset is debited to the partner's capital account. Here the vehicle is taken over for ₹12000; therefore the debit is ₹12000. In journal-style terms, the partner's capital account is debited because the firm is transferring an asset to that partner, reducing the amount ultimately payable to the partner. Option A is correct. Option B, ₹6000, is half the stated value and has no basis in the information given. Option C, ₹24000, doubles the value and is also unsupported. Option D, zero, is wrong because taking over an asset must be recorded at the agreed takeover value. No depreciation, profit-sharing ratio, or other adjustment is mentioned, so none should be invented. Memory cue: asset taken over by a partner means debit that partner's capital account by the agreed value.

The partner taking liability gives relief to the firm, so his capital account is credited. Record the full agreed liability.

When a partner pays dissolution expenses on behalf of the firm, the firm becomes liable to that partner. Therefore, Neelam’s capital account is credited by ₹4,000. The relevant entry is: Realisation Account Dr. ₹4,000; To Neelam’s Capital Account ₹4,000. Exam tip: An expense paid by a partner on behalf of the firm is credited to that partner’s account.

Remuneration is receivable by the partner, so it is credited to capital account. It may also appear as an expense in realisation account.