Capital Accounts

The governing concept is the distinction between a partner's loan and capital contribution. A loan creates a creditor claim against the firm; it does not represent permanent partnership capital or determine the capital ratio. Hence, the loan amount must be identified and separated before comparing capitals. Option A is correct. Including it would overstate A's capital, while treating it as profit or drawings is also incorrect.

The debit and the credit are equal and opposite entries in A's capital account. Net effect = -₹15,000 (debit) + ₹15,000 (credit) = ₹0, so A's capital remains unchanged. A common mistake is to treat each entry separately instead of netting them; under the fluctuating capital method such adjustments are posted directly to the capital account and cancel out when equal. Exam tip: draw the capital T‑account and total debits and credits to avoid sign errors.

Debit capital balance is recoverable and credit capital is liability. For net partners capital debit balance is deducted.

Total credit claims are one lakh and debit current account five thousand is recoverable. Net partners claim is ninety five thousand rupees.

Unnecessary revaluation profit credit overstates capital. The extra four thousand rupees must be removed.

The wrong debit must be removed from capital account so capital account is credited. The correct debit is made in current account.

First actual capital is found after revaluation and other adjustments. Then it is compared with target ratio.

A one lakh is three parts so one part is about thirty three thousand three hundred thirty three. B target is about sixty six thousand six hundred sixty seven so deficiency is about six thousand six hundred sixty seven.

If cash is not brought the deficiency remains recoverable from partner. It may be shown as debit in his current account.

If excess capital is not returned it remains payable to partner. It may be shown as credit in his current account.

Direct answer: Option A, Rs 1,05,000. The reported closing capital of Rs 1,00,000 included a deduction of the Rs 5,000 drawings twice. Drawings should be deducted only once because they represent one withdrawal. Step by step: the incorrect calculation is Rs 1,00,000; one of the two deductions was valid; the second deduction was an extra reduction; add back that extra Rs 5,000: Rs 1,00,000 + Rs 5,000 = Rs 1,05,000. Option A is correct. Option B, Rs 95,000, would deduct the drawings again and make the error worse. Option C, Rs 1,10,000, adds back both deductions, although only one duplicate deduction must be reversed. Option D, Rs 90,000, subtracts the amount still further and is not supported. Exam cue: when an amount is deducted twice, add back one copy only.

Second credit of interest on capital overstates by five thousand and omission of interest on drawings overstates by two thousand. Total overstatement is seven thousand.

It should have been credit but was treated as debit. Difference from correct position is double the amount which is twelve thousand rupees.

Debit balance was recoverable but credit entry shows liability. Difference from correct position becomes double.

Accepted liability is deducted from asset value to find net capital contribution. Outstanding tax is also an accepted liability.

In fixed method capital and current accounts give separate information. Combining them hides the real fixed capital position.

Debit capital balance is amount recoverable from partner. Therefore it is better shown on assets side not as liability.

In capital account actual additional capital is credited in full. Date may be important only for interest calculation.

First identify the method then classify items into debit and credit. This solves both fixed and fluctuating capital questions accurately.

The governing concept is balancing the partner’s current account by classifying each item on the correct side. The opening credit balance is ₹9,000. Interest on capital of ₹7,500 and commission of ₹5,500 are also credits. Total credits therefore equal ₹9,000 + ₹7,500 + ₹5,500 = ₹22,000. Drawings of ₹20,000 and A’s share of loss of ₹3,000 are debits, so total debits equal ₹23,000. Debits exceed credits by ₹23,000 − ₹22,000 = ₹1,000. The closing balance is therefore ₹1,000 debit, making option A correct. The other choices either reverse the side or omit or mishandle one of the listed items.

The governing concept is proportionate restriction when the total amount of allowable interest exceeds the profit available for appropriation. The total interest claims are Rs 14,000 + Rs 21,000 = Rs 35,000. B’s share of the total claim is Rs 21,000/Rs 35,000 = 3/5. Since only Rs 28,000 is available, B’s proportionate interest is 3/5 × Rs 28,000 = Rs 16,800. A would receive the remaining 2/5, or Rs 11,200, and both amounts together use the full available profit. Therefore option A is correct. Option B uses the original claim without restriction, while C gives A’s amount and D allocates the entire profit to B.

The governing concept is the effect of reversing the correct debit and credit treatment. Interest on drawings is income for the firm and a charge against the partner, so the partner’s account should be debited by Rs 3,200. Instead, it was credited by Rs 3,200. Relative to the correct position, the account moves Rs 3,200 upward because the required debit is missing, and another Rs 3,200 upward because an equal credit is wrongly recorded. Total overstatement is therefore Rs 3,200 + Rs 3,200 = Rs 6,400. Option A is correct. A Rs 3,200 answer counts only one side of the error, while C and D ignore the double effect.

The governing concept is the distinction between ordinary drawings and withdrawal of capital under the fixed-capital method. Ordinary drawings are periodic personal withdrawals and are debited to the partner’s current account, leaving fixed capital unchanged. A return of capital, however, is a reduction of the partner’s permanent investment in the firm. It must be debited directly to the partner’s capital account, with Bank or Cash credited. Debiting the current account leaves capital overstated and current-account drawings overstated. Therefore option A identifies the error correctly. Option B reverses the required entry, C confuses a capital transaction with income, and D incorrectly approves the treatment.

The governing concept is recording a non-cash capital contribution subject to an assumed liability. The building enters the firm’s books at Rs 2,00,000 as an asset. Since the firm also accepts responsibility for the secured loan of Rs 50,000, that liability is not part of the partner’s net capital contribution. The amount credited to the partner’s capital account is therefore the net value: Rs 2,00,000 − Rs 50,000 = Rs 1,50,000. The corresponding accounting effect recognises the building, records the loan liability, and credits the partner’s capital for the balance. Thus option A is correct. Option B ignores the liability, C records only the liability, and D incorrectly adds the loan to the asset value.