Capital Accounts

Interest on capital is an appropriation and is debited to appropriation account. Total debit is Rs 3000 plus Rs 2000 equal to Rs 5000.

Direct answer: Option A, Rs 1,600. Interest on drawings is charged to partners because they used firm resources for personal purposes. For the firm it is income, so it is credited to the Profit and Loss Appropriation Account. Add both partners’ amounts step by step: A’s interest Rs 700 + B’s interest Rs 900 = Rs 1,600. Option A is correct. Option B, Rs 200, is only the difference between the two amounts, not their total. Option C, Rs 700, includes only A’s interest and ignores B’s amount. Option D, Rs 900, includes only B’s interest and ignores A’s amount. The word “total” requires addition, not selection of one partner’s figure. Memory cue: interest on drawings is firm income and appears on the credit side; total means add every partner’s amount.

Direct answer: Option A, Rs 3,500 credit. A partner’s salary is credited to the current account because it is an amount allowed to the partner. Drawings are debited because they reduce the amount due to the partner. The opening balance is nil, so calculate: credit salary Rs 6,000 minus debit drawings Rs 2,500 = net credit Rs 3,500. Option A is correct. Option B, Rs 8,500 debit, incorrectly adds the two amounts and also gives the wrong side. Option C, Rs 3,500 debit, has the correct difference but reverses the nature of the balance; salary is credit and drawings are debit, so the larger credit leaves a credit balance. Option D, Rs 6,000 credit, ignores the drawings. The account would be balanced by a credit balance of Rs 3,500. Memory cue: in a current account, credits increase the partner’s claim and debits reduce it.

Interest on capital is allowed only when provided in the deed. If deed is silent it is not recorded in capital account.

Direct answer: Option A, no interest will be debited. Interest on drawings is not an automatic charge in every partnership. It must be authorised by the partnership deed or by an applicable agreement or rule. Step by step: drawings mean amounts withdrawn by a partner for personal use; interest on drawings is compensation to the firm for the use of its money; such compensation can be recorded only when there is a valid provision. If the deed is silent, no interest on drawings is calculated, so nothing is debited to the partner’s capital or current account. Option A is correct. Option B, six percent, has no general automatic application here. Option C, profit ratio, is not the basis for deciding whether interest exists. Option D, capital ratio, is also irrelevant. The important issue is the deed, not a ratio. Memory cue: deed silent means no interest on drawings.

Debit current balance reduces the capital claim. Rs 90000 minus Rs 12000 equals Rs 78000 credit.

Both balances are credit balances, so they must be added: Rs 55000 + Rs 8000 = Rs 63000 credit. Option B reflects a mistaken subtraction (55000 − 8000) which would apply only if one balance were debit, so it is incorrect. Exam tip: always check the sign (credit or debit) of each balance first — add same-signed balances, subtract opposite-signed balances.

Opening capital plus profit gives Rs 74000. Closing balance is Rs 70000 so drawings are Rs 4000.

Direct answer: Option A, Rs 14,000. Under the stated calculation, closing capital equals opening capital minus drawings plus profit share. Let profit share be P. Then Rs 52,000 = Rs 45,000 − Rs 7,000 + P. The amount after opening capital and drawings is Rs 38,000. Therefore P = Rs 52,000 − Rs 38,000 = Rs 14,000. Option A is correct. Option B, Rs 7,000, only repeats the drawings and does not restore the capital to the closing amount. Option C, Rs 10,000, would give closing capital of Rs 48,000, not Rs 52,000. Option D, Rs 52,000, is the closing balance itself, not the profit share. The result assumes no other item, such as interest on capital or salary, is involved, as the question implies. Memory cue: closing = opening − drawings + profit; rearrange to find profit.

Fixed capital account contains capital only and current account contains adjustments. So total position is understood by reading both.

Debit capital balance is an unusual position and amount may be due from partner. Treat it as overdrawn capital.

When firm funds are used to pay a partner's personal expense, it is not a business expense but a withdrawal by the partner. Therefore it is treated as drawings and recorded on the debit side of the partner's capital/current account (or posted to a Drawings account and later adjusted against capital). The option 'As firm expense' is incorrect because the expense is not for business purposes; 'As additional capital' is incorrect because the partner did not contribute funds to the firm but withdrew them. Exam tip: remember the journal entry — Drawings A/c Dr; To Bank A/c — and then reduce the partner's capital or transfer the drawings to the capital account.

Paying firms liability increases the partners claim. So his capital or current account is credited.

Direct answer: Option A, credit to A’s account. A paid Rs 6,000 for a genuine business expense, not for personal use. The firm received the benefit, but A supplied the money personally. Therefore the firm owes A Rs 6,000. A payable amount is credited to A’s capital account under the fluctuating method, or to A’s current account under the fixed-capital method, depending on the system used. Option A is correct. Option B is wrong because a debit would reduce the amount due to A, although the firm actually owes him money. Option C is wrong because drawings are personal withdrawals by a partner; this payment was for the firm’s business. Option D is wrong because the transaction must be recorded: the business expense is recognized and A’s reimbursement claim is recorded. The expense itself is debited in the firm’s books, while A’s account is credited. Memory cue: partner pays firm expense = firm owes partner = credit partner.

Under fixed capital method profit share should go to current account. Recording it in capital account will make capital not fixed.

In fluctuating method adjustments usually go to capital account. If current account is made separately avoid double recording.

A credit opening balance shows capital in favour of partner. Therefore it is recorded on the credit side.

Closing balance becomes opening balance of next year. A credit balance will open as credit opening balance in next period.

Interest on capital is credit and interest on drawings is debit. Net effect is Rs 5000 minus Rs 800 equal to Rs 4200 credit.

The governing rule is that, under the fixed capital system, appropriations or benefits allowed to a partner are recorded in the partner’s current account. B receives two credit items: salary of Rs 12,000 and commission of Rs 3,000. The total credit is calculated as Rs 12,000 + Rs 3,000 = Rs 15,000. Therefore, option A is correct. Option B incorrectly subtracts commission from salary, while options C and D include only one of the two amounts and ignore the other. The question asks for the total credit, so both salary and commission must be added. If the firm maintains fluctuating capital accounts, these items would generally be recorded in the capital account instead, but the amount would still be Rs 15,000.

The governing concept is the treatment of drawings and interest on drawings in a partner’s account. Drawings reduce the partner’s capital or current-account balance and are therefore debited. Interest charged on those drawings is also debited to the partner because it is recoverable from the partner and becomes income for the firm. Thus, both amounts must be added: drawings Rs 10,000 + interest on drawings Rs 1,000 = total debit Rs 11,000. Option A is therefore correct. Option C ignores the interest, option D ignores the drawings, and option B incorrectly subtracts the two amounts. The answer does not depend on whether the firm uses fixed or fluctuating capital; only the account receiving the entries may differ.

Capital account records actual contribution or recognized amount due. A mere oral promise is not enough.

The mode may be cash or bank. Since partners capital increases capital account will still be credited.

Return of capital reduces partners capital. Therefore partners capital account is debited and bank account is credited.

The governing concept is net drawings, which measure the amount ultimately retained by the partner for personal use after any repayment to the firm. The original withdrawal was Rs 15,000. Since A subsequently deposited Rs 5,000 back into the firm, that repayment reverses part of the drawings. The calculation is: net drawings = original drawings − amount returned = Rs 15,000 − Rs 5,000 = Rs 10,000. Therefore, option A is correct. Option B adds the repayment instead of deducting it, option C ignores the repayment, and option D treats only the returned amount as drawings. The result represents the net reduction in A’s account before considering any interest on drawings.