Capital Accounts

Fixed capital becomes Rs 110000 after adding additional capital of Rs 20000. Deducting debit current balance gives net claim of Rs 102000 credit.

Salary and profit are added while drawings and interest on drawings are deducted. Rs 125000 plus Rs 37000 minus Rs 19500 equals Rs 142500.

Items on credit side: opening balance Rs 6000 + salary Rs 12000 + interest on capital Rs 5000 = total Rs 23000. Items on debit side: drawings Rs 15000 + interest on drawings Rs 1200 = total Rs 16200. Closing = credit − debit = Rs 23000 − Rs 16200 = Rs 6800 credit. Option B mistakes the sign (shows debit instead of credit); options C and D are incorrect in magnitude. Exam tip: clearly separate and total all credits and debits (including opening balance sign) before taking their difference.

Credit items: commission Rs 9000 + profit share Rs 11000 = Rs 20000. Debit items: opening debit Rs 4000 + personal expenses paid by firm Rs 7500 = Rs 11500. Difference = Rs 20000 − Rs 11500 = Rs 8500. Since credits exceed debits, the closing balance is Rs 8500 credit. Option C is a common slip — the amount matches but the side is incorrectly given as debit. Exam tip: always total credit and debit columns first, then subtract smaller from larger and state the side of the balance.

In fixed capital method interest should go to current account. So the wrong credit is removed from capital and credited to current account.

Rs 70000 plus Rs 10000 minus Rs 8000 equals Rs 72000. Closing capital is Rs 68000 so drawings are Rs 4000.

After adding additional capital and interest to opening capital and deducting drawings the balance is Rs 78000. Profit of Rs 18000 is needed to reach closing capital.

In ratio three to two As required capital is Rs 150000. Actual capital is Rs 160000 so A can withdraw Rs 10000.

If As capital is Rs 120000 Bs required capital is one fourth which is Rs 30000. B has Rs 50000 so he must withdraw Rs 20000.

Total ratio is ten and third partner has five parts. So half of Rs 300000 which is Rs 150000 is the third partners capital.

Opening debit Rs 3000 and drawings Rs 25000 make total debit Rs 28000. After profit credit Rs 20000 the balance is Rs 8000 debit.

Total interest is Rs 20000 but profit is only Rs 15000. A gets Rs 9000 based on twelve to twenty proportion.

Available profit is divided in the ratio of interest claims. Cs share is two tenths so he receives Rs 4800.

B gets full year interest on Rs 40000 and half year interest on Rs 20000. Total interest is Rs 4000 plus Rs 1000 equal to Rs 5000.

Interest is charged on Rs 30000 for three months and Rs 10000 for nine months. Total interest is Rs 900 plus Rs 900 equal to Rs 1800.

For monthly drawings at the beginning average period is six and half months. Interest on Rs 24000 at twelve percent for six and half months is Rs 1560.

For monthly drawings at the end average period is five and half months. Interest on Rs 36000 at ten percent for five and half months is Rs 1650.

For quarterly drawings at the beginning average period is seven and half months. Interest on Rs 20000 at eight percent for seven and half months is Rs 1000.

For quarterly drawings at the end average period is four and half months. Interest on Rs 16000 at twelve percent for four and half months is Rs 720.

April withdrawal carries interest for twelve months and October withdrawal for six months. Total interest is Rs 1200 plus Rs 1200 equal to Rs 2200.

Direct answer: Option A, it should be credited to the Profit and Loss Appropriation Account. Interest on drawings is charged to the partner because the partner has used firm resources personally. From the firm’s viewpoint, this is income or a recovery. Therefore the correct entry is: Partner’s Current or Capital Account Dr. To Profit and Loss Appropriation Account. If it was wrongly debited to the appropriation account, the debit must be reversed and the item must be credited there. Option A is correct. Option B is wrong because leaving the debit would understate the firm’s profit available for appropriation and reverse the normal treatment. Option C is wrong because interest on drawings is not a trading expense or purchase-related item. Option D is wrong because interest on capital is an amount allowed to partners, whereas interest on drawings is an amount charged to them. Memory cue: interest on capital is a debit of appropriation; interest on drawings is a credit of appropriation.

Under fluctuating capital method partner adjustments like salary are recorded in capital account. Under fixed method it would go to current account.

Under fixed capital normal adjustments are kept in current accounts. Therefore current accounts are prepared to find correct balances.

Moving from Rs 50000 credit to Rs 10000 debit shows total decrease of Rs 60000. It may indicate a serious overdrawn position.

Debit capital balance shows amount against the partner. If capital cannot be negative recovery or adjustment is needed.