Capital Accounts

Correct answer: A. The concerned partner’s capital or current account

The governing concept is adjustment of partners’ agreed capital balances. If the deed requires equal capitals, a deficiency belongs to the partner whose capital balance is below the required level. The correcting entry must therefore be made through that partner’s capital account when the capital method uses capital accounts for the adjustment, or through the partner’s current account when the firm maintains fixed capital accounts and regular adjustments are routed through current accounts. Thus option A is correct. A customer account and a supplier account represent external trade relationships and are unrelated to the partners’ capital equalisation. Goodwill is an intangible business value and should not be used merely to correct a partner’s short capital unless the facts specifically involve a goodwill adjustment.

Correct answer: A. One lakh forty eight thousand rupees

Add capital additional capital profit and interest on capital then deduct drawings and interest on drawings. The closing capital is one lakh forty eight thousand rupees.

Correct answer: A. Seventy thousand rupees

To find opening capital deduct additional capital and profit from closing capital and add drawings. Ninety thousand minus fifteen thousand minus twelve thousand plus seven thousand equals seventy thousand.

Correct answer: A. Credit two thousand rupees

Credit items salary and profit total twenty thousand while debit items opening debit drawings and interest total eighteen thousand. So the closing balance is credit two thousand rupees.

Correct answer: A. Debit six thousand rupees

Credit items are five thousand and four thousand totaling nine thousand. Debit items loss and drawings total fifteen thousand so there is debit balance of six thousand.

Correct answer: A. One lakh rupees

Total parts = 5 + 3 = 8. Value of one part = total adjusted capital ÷ total parts = ₹160,000 ÷ 8 = ₹20,000. Therefore A's target capital = 5 parts = 5 × ₹20,000 = ₹100,000. The closest distractor (₹120,000) is incorrect — it comes from an incorrect split such as treating denominator wrongly or allocating more than 5/8 of the total. Exam tip: divide the total by the sum of ratio parts first, then multiply by the required number of parts to avoid mistakes.

Correct answer: A. Bring four thousand rupees

A eighty eight thousand represents four parts so one part is twenty two thousand. B target capital is sixty six thousand so he must bring four thousand.

Correct answer: A. Partners capital will be overstated by the extra interest amount

Interest on capital is a credit item and recording it twice overstates capital. The extra credit should be removed in correction.

Correct answer: A. Debit Partners Capital Account and credit Partners Current Account

In fixed method interest should be credited to current account. To remove wrong capital credit debit capital account and credit current account.

Correct answer: A. Credit Capital Account and debit Current Account

The direct answer is option A: credit Capital Account and debit Current Account. Under the fixed capital method, the capital account normally remains unchanged except for permanent capital introduced or withdrawn. Drawings are recorded in the partner’s Current Account, because they reduce the partner’s claim temporarily. Here, the drawing was wrongly debited to Capital Account. A debit has reduced capital, so that wrong effect must be cancelled by crediting Capital Account. The same drawing must then be correctly recorded by debiting Current Account. Thus the correction entry is: Current Account Dr. and Capital Account Cr. Option A is correct because it removes the wrong debit from capital and places the debit in the proper account. Option B would debit capital again and credit current account, making the error worse. Option C concerns Bank Account and does not correct the wrongly debited capital; it also may not represent the actual cash entry. Option D is not a journal correction: drawings cannot simply be added to profit. Memory cue: under fixed capital, permanent changes go to Capital Account, while drawings and related items go to Current Account.

Correct answer: A. Capital liability one lakh and current account recoverable twelve thousand

Capital credit balance is a liability and current account debit balance is recoverable. Understand their different nature in presentation.

Correct answer: A. On assets side as recoverable from partner

Debit capital balance shows amount due from partner to firm. Therefore it is shown as recoverable amount.

Correct answer: A. One lakh five thousand rupees

For opening capital deduct credit items from closing capital and add debit items. One lakh ten thousand minus twenty thousand plus fifteen thousand equals one lakh five thousand.

Correct answer: A. Eighty thousand rupees

Add additional capital and deduct loss and drawings. Ninety thousand plus twenty thousand minus sixteen thousand minus fourteen thousand equals eighty thousand.

Correct answer: A. Annual share of profit

In fixed capital annual profit and similar regular adjustments go to current account. Keep only permanent capital changes in capital account.

Correct answer: A. Drawings and losses reduced more than capital

Debit capital balance shows amount may be recoverable from partner. It may arise from excess drawings or heavy losses.

Correct answer: A. Ten thousand rupees

Total capital is one lakh twenty thousand and in two to one ratio B target capital is forty thousand. B has fifty thousand so he must withdraw ten thousand.

Correct answer: A. Bring ten thousand rupees

A ninety thousand represents three parts so one part is thirty thousand. B should have sixty thousand and must bring ten thousand.

Correct answer: A. Current Account will be debited

Under fixed method normal drawings are debited to current account. Capital account changes only when withdrawal is permanent capital withdrawal.

Correct answer: A. Forty five thousand rupees

Capital contribution is recorded at agreed value. Therefore partners capital account will be credited by forty five thousand rupees.

Correct answer: A. Twenty five thousand rupees

Capital is credited by asset value less liability assumed. Thirty thousand minus five thousand equals twenty five thousand.

Correct answer: A. Partners drawings or debit adjustments are high

Debit balance of current account can show amount recoverable from partner. It may grow due to high drawings loss or interest on drawings.

Correct answer: A. Partners Capital Account will be debited

Direct answer: Option A, the partner’s capital account will be debited. Drawings represent money or goods taken by a partner for personal use. They reduce the partner’s claim in the firm. If a separate drawings account is maintained during the year, it normally has a debit balance. At year-end, it is closed by transferring it to the partner’s capital account: Partner’s Capital Account Dr. To Drawings Account. This debit reduces capital. Option A is correct. Option B is wrong because crediting capital would increase the partner’s claim, opposite to the effect of drawings. Option C is wrong because the sales account is not the partner’s personal account and drawings are not sales. Option D is wrong because the Profit and Loss Account is not credited for closing drawings; drawings are a capital adjustment. Memory cue: drawings take value out, so capital is debited.

Correct answer: A. Partners Current Account will be debited

In the fixed capital method the partners' capital accounts remain unchanged; personal transactions like drawings are recorded in partners' current accounts. To close the drawings account the entry is: Partners Current Account Dr. / To Drawings Account. Thus the current account is debited and the drawings account is credited to zero it out. Option B is wrong because the capital account is not adjusted under the fixed method. Option C is incorrect due to wrong posting direction (crediting current account would not close drawings). Option D is irrelevant — the profit & loss account is not used to close individual drawings. Exam tip: Memorize that fixed capital keeps capital accounts intact and uses current accounts for drawings, interest and salary.

Correct answer: A. Debit side

A credit balance is written on debit side as balance carried down to balance the account. Next year it becomes balance brought down on credit side.