Capital Accounts

Correct answer: A. Remove from capital account and credit current account

Under fixed capital method interest should go to current account. If kept in capital account it wrongly increases capital.

Correct answer: A. Credit capital account and debit current account

The wrong debit must be removed from capital account so capital account is credited. Drawings are debited to current account.

Correct answer: A. Because same items may be recorded in different accounts

In fixed method regular items go to current account and in fluctuating method they go to capital account. Identifying the method saves marks.

Correct answer: A. Rs 100000

Additional capital is added to the capital account. In fixed capital method normal profit or drawings do not change capital.

Correct answer: A. Rs 67000

Under fluctuating capital profit is added and drawings are deducted. So Rs 60000 plus Rs 12000 minus Rs 5000 gives Rs 67000.

Correct answer: A. Interest on capital credit and interest on drawings debit

Interest on capital is allowed to partner so it is credited. Interest on drawings is charged from partner so it is debited.

Correct answer: A. As capital account will be credited

When machine is brought as capital the partners capital increases. Therefore the concerned partners capital account is credited.

Correct answer: A. Increase by Rs 6000

Salary increases capital and loss reduces it. Net effect is Rs 9000 minus Rs 3000 which is increase of Rs 6000.

Correct answer: A. A owes amount to the firm

Debit balance of current account shows amount against the partner. It may arise due to excess drawings or charges.

Correct answer: A. Firm owes an amount to B

The governing concept is the interpretation of a credit balance in a partner’s current account under the fixed-capital method. The fixed capital remains separate, while the current account records items such as profit share, interest, salary, commission, drawings and losses. A credit balance of ₹7,500 means that credits exceed debits by ₹7,500, so the net claim stands in B’s favour. The firm therefore owes B ₹7,500, which is a liability of the firm. Option B states the reverse meaning. Option C is unsupported because the current balance does not make fixed capital zero, and option D would normally create a debit or reduce the balance rather than explain a credit balance.

Correct answer: A. All adjustments are recorded in capital account itself

In fluctuating capital method profit loss interest and drawings are recorded in capital account itself. So a separate current account is generally not needed.

Correct answer: A. Rs 10000

Use the formula: \(\text{Interest} = \text{Capital} \times \text{Rate}\). Here Capital = Rs 100000 and Rate = 10%, so \(100000 \times 10\% = 10000\). Therefore the interest for the year is Rs 10000. Option C (Rs 11000) would correspond to an 11% rate and is incorrect; option B (Rs 9000) corresponds to 9% and is also wrong. Exam tip: convert percent to decimal (10% = 0.10) and multiply to avoid calculation mistakes.

Correct answer: A. Rs 1200

A mid year withdrawal carries interest for six months. Ten percent of Rs 24000 for half year is Rs 1200.

Correct answer: A. In equal profit-sharing ratio

In a partnership, profits are distributed according to the profit-sharing ratio agreed in the partnership deed. Since the profit ratio is stated to be equal, profits will be shared equally despite different capital amounts. The closest distractor (capital ratio) applies only when no profit-sharing ratio is given. Drawings and partner salary are adjustment items and are not the primary basis for sharing profits unless the deed specifically provides otherwise. Exam tip: Always use the stated profit-sharing ratio first; use capital ratio only if profit ratio is not specified.

Correct answer: A. Increase of Rs 12000

Closing balance is Rs 12000 more than opening balance. With no drawings this increase comes from profit or additional capital.

Correct answer: A. Rs 7000 credit

Debit balance is set off against credit from profit. Rs 10000 minus Rs 3000 gives Rs 7000 credit.

Correct answer: A. Rs 2500 debit

Drawings are a debit item and reduce credit balance. Rs 6500 minus Rs 4000 leaves Rs 2500 debit balance.

Correct answer: A. Additional capital

In fixed capital account only real increase or decrease in capital is recorded. Profit salary and interest go to current account.

Correct answer: A. Drawings

Drawings reduce the partners capital. So under fluctuating capital method they are recorded on debit side of capital account.

Correct answer: A. Share of loss

The governing concept is the fluctuating capital method, under which one capital account records both permanent and recurring adjustments. Items that increase the partner’s claim are credited: share of profit, interest on capital, and additional capital introduced. A partner’s share of loss has the opposite effect because it reduces the amount due to that partner. Therefore, loss is debited to the capital account rather than credited. This makes option A correct. The other three alternatives are credit items because each increases the partner’s capital balance. The distinction is different from the fixed capital method, where many recurring adjustments are transferred to the current account.

Correct answer: A. It will be debited like drawings

When a partner takes the firm’s goods for personal use, the transaction is not a business sale to an outside customer. It is a withdrawal of firm resources by that partner and is therefore treated as drawings. The value of the goods taken, here Rs 3,000, must be recorded against the partner who received the personal benefit.

Under the fluctuating-capital method, drawings are debited directly to the partner’s capital account. The entry reduces the partner’s balance because goods worth Rs 3,000 have been removed for private use. It is not credited as capital or profit, and it cannot be ignored. Therefore the capital account is debited like drawings, making option A correct.

Correct answer: A. Rs 48000

Profit is added and withdrawal of capital is deducted. Rs 50000 minus Rs 10000 plus Rs 8000 equals Rs 48000.

Correct answer: A. To current account

Under fixed capital drawings do not directly reduce capital account. At year end they are adjusted in current account.

Correct answer: A. To capital account

Direct answer: Option A, to the capital account. In the fluctuating capital method, there is normally no separate permanent current account for routine partner adjustments. Drawings represent money or goods taken by a partner for personal use, so they reduce the partner’s capital. The drawings account is therefore closed by transferring it to the partner’s capital account at year end. Option A is correct. Option B is wrong in this context because a current account is mainly used under the fixed-capital method, not always under the fluctuating method. Option C is wrong because the Sales Account records sales revenue and has no role in settling a partner’s drawings. Option D is wrong because General Reserve is a reserve of the firm, not the normal account for an individual partner’s withdrawals. The debit balance of drawings ultimately reduces capital. Memory cue: fluctuating method means partner adjustments finish in capital.

Correct answer: A. Rs 5000

Total capital = Rs 40,000 + Rs 60,000 = Rs 100,000. Total interest = Rs 100,000 × 5% = Rs 5,000. Option C (Rs 6,000) is incorrect because it equals 5% of Rs 120,000, which is not the total capital here. Exam tip: either calculate interest for each partner separately (40,000×5% and 60,000×5%) or add capitals first and apply the percentage once.