Capital Accounts

The governing concept is the meaning of a debit balance in a partner’s capital account. A credit balance normally represents the firm’s net amount payable to the partner, whereas a debit balance indicates that the partner’s account has been reduced below zero or that an amount is recoverable from the partner. In examination language, this is generally interpreted as the partner having withdrawn more than the amount standing to his credit, producing an overdrawn capital position. Therefore, option A is correct. Additional capital would normally create a credit, not a debit. The other choices do not logically follow: a debit balance does not mean the firm gave nothing or that the partner can never receive future profits.

Capital represents the partner's equity and normally has a credit balance. In a Capital Account ledger, opening credit balances are shown on the credit side (commonly as "By balance b/d"). Option B is incorrect because the debit side is used for drawings or decreases in capital. Option D is potentially misleading—although capital appears on the liabilities side of the Balance Sheet, the question specifically asks about the Capital Account format, so that answer is not relevant. Exam tip: Remember capital = owner's equity = normal credit; record opening capital as a credit entry ("By balance b/d").

Under fixed capital only capital addition and withdrawal of capital change capital. Rs 40000 plus Rs 10000 minus Rs 5000 equals Rs 45000.

Profit share is credited and interest on drawings is debited. Net effect is Rs 16000 minus Rs 1200 equal to Rs 14800 credit.

Salary is a credit item and loss is a debit item. Rs 10000 minus Rs 7000 equals Rs 3000 credit.

Furniture comes into firm as an asset so it is debited. Partners capital increases so capital account is credited.

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

Interest on capital is allowed only when written in agreement. If deed is silent it is not taken to capital or current account.

Interest on drawings is a charge against partner and needs provision. If deed is silent it is not charged.

Profit is divided in the given ratio. Sum of ratio parts = 3 + 2 = 5. A's share = 3/5 of the total profit. So A is credited = 50,000 × (3/5) = Rs 30,000. Why other options are wrong: Rs 25,000 would be an equal split (not the given ratio); Rs 20,000 is B's share (2/5 of total); Rs 50,000 is the entire profit, not A's share. Exam tip: always add the ratio parts first, then multiply the total by the relevant fraction (e.g.,

total ×
(3/5)).

Total parts = 4 + 1 = 5. B's share = 1 part = \(\frac{1}{5}\) of the total. So B's loss = \(\frac{1}{5}\times 25{,}000 = 5{,}000\) Rs, which will be debited to B's account. Option B (Rs 20,000) is A's share (4/5) and is a common mistake if the partners are confused or reversed. Exam tip: always add the ratio parts first, then multiply the partner's part by the total loss.

Even if capital is brought through bank the partners capital increases. So his capital account is credited.

Under fixed capital drawings should be adjusted in current account. Closing them to capital account wrongly reduces fixed capital.

Under the fluctuating capital method a partner’s profit share is credited to his capital account, so omitting that credit leaves the closing capital understated. The closest distractor (B) is wrong because omission cannot cause an overstatement — overstatement happens only if an excess credit was posted. To rectify, pass a correcting entry (e.g., debit Profit & Loss Appropriation and credit Partner’s Capital). Exam tip: always trace profit distribution postings (capital vs current accounts) when verifying closing capitals in a trial balance or partners’ ledger.

Interest on drawings is charged from partner so it should be debited. Crediting it wrongly increases partners claim.

Interest on capital is an appropriation in favour of the partner, so its normal effect is to credit the partner's capital/current account and debit Interest on Capital (or P&L Appropriation). If the partner's account was wrongly debited, rectify by crediting the partner's account and debiting Interest on Capital. Option C (treat as drawings) is incorrect because drawings reduce capital, whereas interest on capital increases the partner's balance. Exam tip: remember the normal balance for appropriation items (interest on capital — credit partner; interest on drawings — debit partner).

The governing concept is that net drawings equal total personal withdrawals less any amount returned to the firm during the relevant period. A initially withdrew Rs 10,000. Returning Rs 3,000 reduces the amount that remains withdrawn because that portion is no longer being used personally. The calculation is: Rs 10,000 − Rs 3,000 = Rs 7,000. Therefore, option A is correct. Option B adds the returned amount and overstates the drawings. Option C reports only the repayment, while option D ignores the repayment completely. Because the question gives no rate or period for interest on drawings, no interest is calculated; the answer is limited to the net principal amount withdrawn.

The governing rule for a partner’s current account is to total credit items and debit items separately and then determine the balance. The opening credit balance is Rs 2,000 and salary credited is Rs 5,000, so total credits equal Rs 2,000 + Rs 5,000 = Rs 7,000. Drawings are a debit of Rs 9,000. Since debits exceed credits by Rs 9,000 − Rs 7,000 = Rs 2,000, the closing balance is Rs 2,000 debit. Therefore, option A is correct. Option B incorrectly totals all figures, option C reverses the balance side, and option D ignores the opening credit and salary credit.

Commission is credit while opening debit and interest on drawings are debit. Rs 7500 minus Rs 1500 equals Rs 6000 credit.

The governing concept is equalisation of partners’ capital balances. To make the capitals equal, the lower balance must be increased until it reaches the higher balance. A’s capital is Rs 90,000 and B’s capital is Rs 70,000, so the shortfall in B’s capital is calculated as Rs 90,000 − Rs 70,000 = Rs 20,000. B should therefore introduce Rs 20,000 as additional capital, making his revised balance Rs 70,000 + Rs 20,000 = Rs 90,000. Option A is correct. Option B adds both existing capitals, option C uses an incorrect difference, and option D merely repeats B’s existing capital rather than the amount required to equalise the two balances.

Difference between A's and B's capital = Rs 1,20,000 − Rs 90,000 = Rs 30,000. Since only A is withdrawing, he must withdraw the entire excess so that both capitals become equal. Hence A should withdraw Rs 30,000. Option C (Rs 90,000) is wrong because withdrawing Rs 90,000 would leave A with Rs 30,000, not equal to B; options B and D are clearly incorrect as they imply excessive or total withdrawal. Exam tip: subtract the smaller capital from the larger to get the excess; if only one partner adjusts, that partner withdraws the full excess.

Capital ratio equals profit ratio when capitals are maintained in that ratio. So \(A:B=2:1\). Total ratio parts \(=2+1=3\). Therefore A's share of total capital is \(\frac{2}{3}\times 90,000=60,000\). Hence A's capital is \(\text{Rs }60,000\).

Capitals are divided in the profit-sharing ratio. Total parts = 3 + 2 = 5; B's share = 2 parts. Thus B's capital = \(\frac{2}{5}\times 100000 = 40000\) rupees. Option B (Rs 60000) is incorrect because that equals A's share (3/5), option C (Rs 50000) would be from an equal split mistake, and option D is a calculation error. Exam tip: always add ratio numbers to get total parts, then multiply the total capital by the partner's fraction.

A credit balance in a partner's capital account means the partner has capital standing in his favour — i.e. the firm owes that amount to the partner (a liability for the firm). Option B is incorrect because if the partner owed money to the firm, the capital account would show a debit (overdrawn) balance. Option C describes an overdrawn/negative capital situation which would be a debit balance, not a credit. Option D is irrelevant: a closing balance does not imply the account is closed. Exam tip: remember the simple rule — credit balance = partner's claim (liability of firm); debit balance = partner owes the firm.

To Balance carried down is written to show closing balance of the account. Next year it becomes Balance brought down.