Partner Accounts

A final credit balance in a partner’s capital account represents the amount payable by the firm to that partner. Therefore, the firm will pay ₹22,000 through cash or bank. Option B is incorrect because an amount is received from a partner when the partner’s account has a final debit balance. Exam tip: Credit balance means payment to the partner; debit balance means payment received from the partner.

In a partner’s capital account at dissolution, a final debit balance means the debit side is greater than the credit side. In practical terms, the partner’s capital has a deficiency: the firm is entitled to receive that amount from the partner, subject to the applicable settlement rules. Thus a final debit balance of ₹7,000 indicates ₹7,000 recoverable from the partner, so option A is correct.

A credit balance would have the opposite meaning: it would represent an amount payable to the partner. A debit balance does not by itself prove that the firm earned a profit, and it does not mean that there is no liability. Therefore the phrase “amount will be recovered from partner” best describes the accounting meaning of the stated balance.

This rule relates to distribution of deficiency of an insolvent partner. In easy questions, identifying the situation is important.

The unpaid deficiency of an insolvent partner is borne by solvent partners. Check the correct ratio as per rule.

Under this rule, solvent partners bear deficiency in their capital ratio. First read the instruction given in the question.

Payment reduces the firm's liability to the partner, so capital account is debited. This is common in final settlement.

When cash is received from a partner, his liability is reduced and capital account is credited. This happens when debit balance is recovered.

Even for unrecorded asset, the partner receives value, so capital account is debited. Realisation account is credited along with it.

Taking an unrecorded liability means the partner bears the firm's burden, so his capital account is credited. Realisation account has the opposite effect.

The governing rule is that an asset taken over by a partner is debited to that partner’s Capital Account at the agreed value, because the partner receives an asset from the firm. Cash paid by the partner to the firm is credited to the partner’s Capital Account because it settles part of the amount due. Thus, the net debit is ₹10,000 − ₹2,000 = ₹8,000. A debit of ₹12,000 would ignore the cash payment, while a credit treatment reverses the accounting effect. A debit of ₹2,000 considers only the cash and ignores the stock. Therefore, the partner’s Capital Account has a net debit of ₹8,000, making option A correct.

The governing concept is the accounting treatment of assets and liabilities taken over by a partner on dissolution. When the partner assumes a firm liability, the partner becomes responsible for paying it; this is credited to the partner’s Capital Account because it reduces the firm’s obligation and increases the partner’s claim adjustment. Goods taken over are debited to the partner’s Capital Account at their agreed value. Therefore, the net credit is ₹9,000 − ₹3,000 = ₹6,000. Option B adds both figures instead of offsetting opposite effects. Option C reverses the final direction, and option D ignores the value of goods taken over. Hence, option A is correct.

Partner's capital is a liability of the firm, so it is generally on credit side. Negative capital may be different.

The governing concept is the meaning of a debit or credit balance in a partner’s Capital Account. A debit balance means that the debits in the account exceed the credits. In substance, the partner has withdrawn more than the amount standing to the partner’s credit, or the partner has borne losses, so the partner owes that amount to the firm. During final settlement on dissolution, the debit balance is recovered from the partner, subject to the applicable partnership rules. Option B is incorrect because profit normally creates a credit, not a debit. Option C describes a credit balance, and option D is unrelated to the balance’s meaning. Therefore, option A is correct.

At dissolution, the life policy reserve is treated like a free accumulated profit when it is not required to meet any specific liability. It is therefore credited to the partners’ capital accounts in their profit-sharing ratio. A zero cash balance or the sale of only one asset does not determine this transfer. Exam tip: free reserves are distributed among partners in the profit-sharing ratio.

A fictitious asset is like a loss, so it is debited to partners' capital accounts. Share it in profit sharing ratio.

B's share is one-fifth, so two thousand rupees will be debited. Treat fictitious asset like a loss.

The governing rule is that an asset taken over by a partner is debited to that partner’s Capital Account at the agreed value. The partner initially has a credit balance of ₹40,000, representing the amount payable by the firm. Taking an asset worth ₹5,000 reduces this claim because the partner has received part of the settlement in kind. Calculation: remaining credit balance = ₹40,000 − ₹5,000 = ₹35,000. Option B incorrectly adds the asset value, while option C ignores the existing credit balance and option D reverses the balance’s nature. Therefore, before any further cash payment, the Capital Account will show a credit balance of ₹35,000, so option A is correct.

A debit balance means that the partner owes money to the firm. When the partner pays ₹3,000, equal to the debit balance, the balance is fully settled and the final balance becomes zero. A debit balance does not increase on payment; it decreases. Exam tip: Payment of a debit balance closes the partner’s capital account with nil balance.

A realisation profit is the excess of realisation proceeds and other relevant credits over the amounts transferred and expenses charged to the Realisation Account. At dissolution, this profit belongs to the partners and is distributed in their profit-sharing ratio. If the partners are equal, each receives an equal share, and that share is credited to the partner’s capital account.

The total profit is ₹12,000 and there are three equal partners. Dividing gives ₹12,000 ÷ 3 = ₹4,000 for each partner. Therefore ₹4,000 is credited to every partner’s capital account, so option A is correct. The full ₹12,000 is not credited to each partner; it is divided equally among all three.

The middle partner's share is three-seventh, so loss is nine thousand rupees. Loss is debited to capital account.

When a partner pays the firm's liability from personal assets, the firm becomes liable to reimburse that partner. Therefore, the partner's capital account is credited. This is not realisation profit; it is a payment of the firm's liability by the partner. Exam tip: A payment made by a partner on behalf of the firm is credited to the partner's capital account.

The direct answer is option A, the credit side. During dissolution, realisation profit is transferred to the partners’ capital accounts in the profit-sharing ratio. This profit increases each partner’s capital, so it is credited. A general reserve is also an accumulated profit belonging to the partners; distributing it increases their capital, so it is credited as well. Option A is correct, and both amounts are divided in the agreed profit-sharing ratio. Option B, debit side, would reduce capital and is opposite to the effect of receiving profit or reserve. Option C, only in memorandum, is wrong because these amounts must be posted to the actual capital accounts. Option D, nowhere, is wrong because every distribution requires an accounting entry. A useful check is: amounts that increase a partner’s capital go on the credit side; amounts withdrawn or charged to the partner go on the debit side.

Both reduce capital, so they are recorded on debit side. They should be shared in the profit sharing ratio.

Capital accounts show final settlement of each partner. They tell who is to be paid or from whom amount is to be received.

A balanced capital account shows that payable or receivable amount of that partner is settled. In final check, all capital accounts should close.