Partner Accounts

First assets and liabilities are settled through realisation account. Then capital accounts show final payable or receivable amounts.

The governing accounting concept is the transfer of the realisation result to the partners’ capital accounts when a firm is dissolved. If assets are realised for more than their book value, or liabilities are settled for less than their recorded amount, the firm earns a realisation profit. This profit is distributed among partners in their profit-sharing ratio and credited to each partner’s capital account, thereby increasing the capital balance. Hence option A is correct. A realisation loss is debited and reduces capital. Drawings also reduce a partner’s capital, while a fictitious asset is an item to be written off and does not create an increase in capital.

Drawings are amounts withdrawn by a partner, so capital reduces. Record it on the debit side of capital account.

The direct answer is option A: the partner’s capital account is debited. On dissolution, if a partner takes an asset instead of receiving cash, the partner is receiving value from the firm. The agreed value of that asset is treated as the amount settled with the partner, so the partner’s capital account is debited by that value. Option A is correct. Option B, crediting the capital account, is wrong because credit would increase the amount payable to the partner, whereas taking the asset settles or reduces that claim. Option C says the Realisation Account will not be debited; this is incorrect because the asset taken by a partner is recorded through the Realisation Account, generally by debiting the partner’s capital account and crediting Realisation. Option D, no effect, is wrong because both the asset and the partner’s settlement must be recorded. Memory cue: asset taken by partner means debit partner’s capital.

Realisation profit or loss is shared among partners in the profit sharing ratio. Read the given ratio carefully.

When no ratio is given, partners are treated as equal. This is the common rule in easy exam questions.

General reserve is accumulated profit of the firm. Credit it to capital accounts in profit sharing ratio.

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

The governing concept is allocation of realisation profit according to the partners’ agreed profit-sharing ratio. The ratio 3:1 contains 3 + 1 = 4 total parts. The first partner is entitled to 3 of those 4 parts. Therefore, first partner’s share = ₹24,000 × 3/4 = ₹18,000. Hence option A is correct. The second partner would receive ₹24,000 × 1/4 = ₹6,000, and the two shares together total ₹24,000, providing a useful check. Option B is the second partner’s share, option C is only half the profit, and option D assigns the entire profit to the first partner. In dissolution accounting, the realisation profit is transferred to the partners’ capital or current accounts in their agreed sharing ratio.

The governing accounting concept is that a realisation loss on dissolution is transferred to the partners’ capital or current accounts in their agreed profit-sharing ratio, unless the partnership agreement states otherwise. The ratio 2:3 contains 5 total parts, of which A is entitled to 2 parts. Therefore, A’s share of the loss is ₹25,000 × 2/5 = ₹10,000. Hence option A is correct. Option B is ₹15,000, which is B’s three-fifths share. Option C represents only one-fifth of the loss and is not either partner’s agreed share. Option D is the entire loss, not A’s individual burden.

The governing concept is distribution of a reserve in the partners’ profit-sharing ratio. The total ratio is 1 + 2 + 3 = 6 parts, and the third partner is entitled to 3 parts. His share is (3/6) × ₹18,000 = 1/2 × ₹18,000 = ₹9,000. Therefore option A is correct; ₹6,000 and ₹3,000 correspond to smaller shares, while ₹18,000 is the whole reserve.

Taking furniture gives the partner an asset. Therefore seven thousand rupees will be debited to his capital account.

When a partner takes over a liability, the partner becomes personally responsible for settling that liability. In the dissolution entry, the creditors’ liability is removed from the firm’s books, and the partner’s capital account is credited with the amount assumed. Thus, the capital account receives a credit of ₹13,000. Option A is correct. It is not debited, because the partner is taking responsibility for a firm liability rather than withdrawing an asset. ₹26,000 is twice the actual amount and has no accounting basis. ‘No entry’ is also incorrect because the assumption of creditors must be recorded in the partner’s account and in the Realisation Account.

The direct answer is A: debit ₹4,000. When a partner takes an asset during dissolution, the partner becomes responsible for its agreed value, so the partner’s capital account is debited by ₹5,000. If the partner pays ₹1,000 in cash to the firm, that cash payment reduces the net amount charged to the partner; it is credited to the partner’s capital account. The net debit is therefore ₹5,000−₹1,000=₹4,000. A is correct. B, debit ₹6,000, incorrectly adds the cash payment instead of subtracting it. C, credit ₹4,000, reverses the direction: the partner has taken value from the firm, so the net effect is a debit. D, debit ₹1,000, considers only the cash and ignores the ₹5,000 asset. A useful account rule is: asset taken is debit, cash paid by the partner is credit, and the difference is the net debit. Check the amount and the direction separately.

The direct answer is option A: credit ₹3,000 to the partner's capital account. The partner paid a dissolution expense personally but for the firm's benefit. Thus the firm has received the benefit and owes the partner ₹3,000. In the firm's books, the partner's claim is increased, so the partner's capital account is credited. Option B, debit ₹3,000, would reduce the amount owed to the partner and is the opposite treatment. Option C, debit ₹6,000, has both the wrong direction and the wrong amount. Option D, no entry, is wrong because a payment made for the firm creates an amount payable to the partner. The expense itself is debited to the Realisation Account, while the partner's account is credited.

A partner who performs dissolution work is entitled to remuneration when the partnership agreement or the stated arrangement provides for it. This amount is a gain or benefit for that partner, not a loss charged to the partner. Therefore, it increases the amount due to the partner at the time of settlement.

The payable remuneration is ₹8,000, so the partner’s capital account receives a credit of ₹8,000. This is why option A follows. A credit increases the partner’s claim against the firm, whereas a debit would reduce it. The amount must not be changed to ₹4,000, and “no entry” is incorrect because the remuneration is specifically stated as payable and must be recorded.

A debit balance means that the partner owes ₹9,000 to the firm. After paying ₹5,000, the outstanding amount decreases to ₹9,000 − ₹5,000 = ₹4,000, so a debit balance of ₹4,000 remains. Adding the payment to get ₹14,000 is incorrect because the payment reduces the amount owed. Exam tip: A payment by a partner with a debit balance decreases that debit balance.

Payment ends the firm's liability to the partner. Therefore the partner's capital account is debited.

The direct answer is option A: the capital account is recorded on the credit side. When a partner brings cash into the firm on dissolution, the firm receives cash and the partner’s amount due to the firm increases, or an amount payable by the partner is recorded. In the partner’s capital account, this receipt is therefore credited. Option A is correct. Option B, debit side, is wrong because a debit would reduce the partner’s capital balance or record value taken from the firm, which is the opposite situation. Option C, only in the Bank Account, is incomplete and wrong because the cash entry must also be reflected in the partner’s capital account. Option D, nowhere, is wrong because every financial receipt must be recorded. The exact journal presentation can depend on the accounting format, but under the stated question’s treatment the partner’s capital account is credited. Memory cue: cash received from partner increases the credit side.

Under fixed capital method, current account balance is transferred to capital account. This allows final settlement through one account.

The direct answer is option A: capital decreases. A debit balance in the current account means the partner has withdrawn more than the amount credited to that current account; therefore the partner owes that amount to the firm. When this debit balance is transferred to the capital account, the partner's capital account is debited. A debit reduces the credit balance of capital, so capital decreases. Option B, capital increases, is opposite to the effect of a debit. Option C, assets increase, is unrelated because this transfer is between two partner-related accounts. Option D, liabilities decrease, is also not the direct effect; the entry changes the partner's capital balance. Do not confuse a debit balance with a credit balance: a credit balance would increase capital when transferred.

A partner’s loan is money lent by the partner to the firm, whereas capital is the partner’s investment in the business. These are different in nature and have different settlement rules. A loan is an outside liability of the firm in relation to the partner and is normally paid separately from capital during dissolution.

Because it represents a separate obligation, the partner’s loan is shown separately from the partner’s capital account. It is not sales, accumulated profit, or drawings. Keeping the two accounts separate prevents the amount payable as loan from being confused with the partner’s residual capital claim. Therefore option A is correct.

At dissolution, every asset and liability of the firm must be settled. A loan given by the firm to a partner is an amount receivable by the firm, not an amount payable to the partner. The partner has borrowed money from the firm, so the partner is responsible for returning it during the final settlement. This protects the firm’s creditors and partners by ensuring that all firm assets are collected.

Therefore, the amount is recovered from the partner, which is option A. It is not paid to the partner, because the direction of payment is opposite: the firm is the lender and the partner is the borrower. It does not automatically become a reserve or realisation profit. Any gain or loss from realisation is determined separately after considering assets, liabilities, and settlement expenses.

The governing concept is settlement of a partner’s capital balance after adjusting an amount recoverable from that partner. The credit balance of ₹28,000 is initially payable by the firm to the partner. However, the partner owes the firm ₹4,000 as a loan, so this amount is deducted from the amount payable. Calculation: net payment = ₹28,000 − ₹4,000 = ₹24,000. Therefore, option A is correct. Option B ignores the loan recovery, option C adds the amount owed instead of deducting it, and option D is only the loan amount rather than the final settlement. The adjustment prevents duplicate or excessive payment.

Interest on capital is an amount that the firm owes to the partner when the partnership agreement allows or requires such interest. From the partner’s point of view, it is income; from the firm’s point of view, it is an expense or amount payable. On dissolution, this payable amount is transferred to the partner’s capital account so that the partner receives the credit due before the final balance is settled.

Thus, interest on capital is recorded on the credit side of the partner’s capital account, making option A correct. The credit increases the amount standing to the partner’s credit. It is not entered on the debit side, because a debit would reduce the partner’s claim. It is also not recorded in the Realisation Account, since interest on capital is a partner-related adjustment rather than the realisation of a firm asset or liability.