If the firm paid A's personal income tax of Rs 18,000 and it was wrongly recorded as a firm expense, what is the correct entry in the capital/accounts?

Correct answer: Debit A's account as drawings (debit)

A partner’s personal tax is not a firm expense. When the firm pays a partner’s personal liability it should be recorded as the partner’s drawings (debit partner’s drawings/capital account) and bank should be credited. If it was already entered as a firm expense (Tax Expense debited, Bank credited), reverse that expense (credit Tax Expense) and record Debit Drawings A/c, Credit Bank. Option B is wrong because crediting capital would incorrectly increase the partner’s capital. Options C and D are irrelevant — it is neither an appropriation of profit nor a firm liability. Exam tip: Always treat personal expenses paid by the firm as drawings and rectify any expense entries by reversing them before posting the drawings entry.