Partnership capital and current accounts

Topic 18: Partnership Capital and Current Accounts — 50 Hard MCQs

1. A partnership keeps fixed capital accounts.

Which item is recorded in a partner’s capital account?

A drawings
B interest on drawings
C additional capital introduced
D partner salary

2. A partnership keeps fixed capital accounts.

Which item is recorded in a partner’s current account?

A original capital introduced only
B partner’s share of profit
C bank loan from an outsider
D purchase of inventory from supplier

3. A partnership keeps fluctuating capital accounts.

Which statement is correct?

A drawings are recorded in current accounts only
B profit shares are recorded in capital accounts
C capital accounts never change after formation
D current accounts must always be prepared

4. A partner’s current account has a debit balance.

What does this usually mean?

A the partner is owed money by the business
B the partner has overdrawn from the business
C the partner has introduced capital
D the partnership has made a profit

5. A partner’s current account has a credit balance.

What does this usually mean?

A the partner owes the business
B the business owes the partner
C the partner has no claim on profit
D drawings exceed all credits

6. A partner has opening current account credit balance $4200. Salary credited $18 000. Interest on capital credited $3000. Share of profit credited $22 000. Drawings were $26 000 and interest on drawings was $900.

What is the closing current account balance?

A $20 300 credit
B $20 300 debit
C $21 100 credit
D $73 100 credit

7. A partner has opening current account debit balance $2500. Salary credited $12 000. Profit share credited $15 000. Drawings were $21 000. Interest on drawings was $600.

What is the closing current account balance?

A $2900 credit
B $2900 debit
C $3900 credit
D $4900 debit

8. A partner has opening current account credit balance $6000. During the year, drawings were $24 000, interest on drawings was $800, salary was $10 000 and profit share was $14 000.

What is the closing current account balance?

A $5200 credit
B $5200 debit
C $6200 credit
D $13 800 debit

9. A partner has opening current account debit balance $3200. Interest on capital is $2500. Salary is $16 000. Share of profit is $18 000. Drawings are $29 000.

What is the closing balance before interest on drawings?

A $4300 credit
B $4300 debit
C $14 700 credit
D $68 700 debit

10. Using the information in Question 9, interest on drawings is $700.

What is the final closing current account balance?

A $3600 credit
B $5000 credit
C $3600 debit
D $5000 debit

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. A partnership has fixed capitals. A’s capital account balance is $80 000. During the year A introduces additional capital of $15 000 and withdraws capital permanently of $5000.

What is A’s closing capital account balance?

A $60 000
B $80 000
C $90 000
D $100 000

12. A partnership has fixed capitals. B’s capital account is $50 000. B’s current account has opening debit balance $4000. B’s profit share is $18 000, drawings are $15 000 and interest on drawings is $600.

What is B’s closing current account balance?

A $1600 debit
B $1600 credit
C $2400 debit
D $2400 credit

13. A partnership has fluctuating capital accounts. C’s opening capital balance is $70 000. C introduces capital of $10 000, receives profit share of $20 000, makes drawings of $24 000 and is charged interest on drawings of $800.

What is C’s closing capital balance?

A $75 200
B $76 000
C $76 800
D $124 800

14. Which item is debited to a partner’s current account?

A partner salary
B interest on capital
C share of profit
D drawings

15. Which item is credited to a partner’s current account?

A drawings
B interest on drawings
C share of loss
D interest on capital

16. Which double entry records a partner’s salary under fixed capital accounts?

A Debit partner current account, credit appropriation account
B Debit appropriation account, credit partner current account
C Debit salary expense, credit bank
D Debit capital account, credit bank

17. Which double entry records interest on drawings under fixed capital accounts?

A Debit appropriation account, credit partner current account
B Debit partner current account, credit appropriation account
C Debit drawings account, credit bank
D Debit income statement, credit partner current account

18. Which double entry records interest on capital under fixed capital accounts?

A Debit appropriation account, credit partner current account
B Debit partner current account, credit appropriation account
C Debit income statement, credit partner capital account
D Debit bank, credit partner current account

19. Which double entry records a partner’s share of residual profit under fixed capital accounts?

A Debit partner current account, credit appropriation account
B Debit appropriation account, credit partner current account
C Debit income statement, credit drawings
D Debit capital account, credit income statement

20. Which double entry records cash drawings by a partner under fixed capital accounts?

A Debit partner current account, credit bank
B Debit bank, credit partner current account
C Debit appropriation account, credit bank
D Debit salary expense, credit bank

21. A partner takes goods costing $1800 for personal use. The goods would normally sell for $2500.

Which double entry is correct?

A Debit partner current account $1800, credit purchases $1800
B Debit partner current account $2500, credit sales $2500
C Debit drawings $2500, credit purchases $2500
D Debit purchases $1800, credit partner current account $1800

22. A partnership has fixed capitals. A’s current account opening balance is $3000 credit. A’s drawings are $12 000. A’s salary is $9000. A’s interest on capital is $2400. A’s share of residual profit is $8500. Interest on drawings is $500.

What is A’s closing current account balance?

A $10 400 credit
B $10 400 debit
C $15 400 credit
D $35 400 credit

23. A partnership has fixed capitals. B’s current account opening balance is $1500 debit. B’s drawings are $10 000. B’s salary is $6000. B’s interest on capital is $1800. B’s share of residual loss is $3500.

What is B’s closing current account balance?

A $7200 debit
B $7200 credit
C $9200 debit
D $22 800 debit

24. Under fixed capital accounts, where is a partner’s share of loss recorded?

A debit side of current account
B credit side of current account
C debit side of capital account only
D credit side of capital account only

25. Under fluctuating capital accounts, where are drawings recorded?

A debit side of capital account
B credit side of capital account
C debit side of current account only
D not recorded

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

26. A partnership has fixed capitals. Partner A’s capital account is $100 000. Partner A’s current account is $8000 credit. What is A’s total claim on the partnership?

A $92 000
B $100 000
C $108 000
D $8000

27. A partnership has fixed capitals. Partner B’s capital account is $75 000. Partner B’s current account is $6000 debit.

What is B’s net claim on the partnership?

A $69 000
B $75 000
C $81 000
D $6000

28. A partnership has fluctuating capital accounts. Partner C’s capital account has opening credit balance $90 000. C’s drawings are $18 000, salary is $14 000, interest on capital is $4500 and profit share is $16 000.

What is C’s closing capital balance?

A $70 500
B $88 500
C $106 500
D $142 500

29. A partnership has fluctuating capital accounts. Partner D’s opening capital is $60 000 credit. D’s drawings are $15 000. D’s share of loss is $9000. D introduces additional capital of $12 000.

What is D’s closing capital balance?

A $48 000 credit
B $48 000 debit
C $66 000 credit
D $96 000 credit

30. A partner’s current account is credited with $5000 interest on capital in error. The agreement allowed only $3000.

What correction is needed in that partner’s current account?

A debit $2000
B credit $2000
C debit $8000
D no correction

31. A partner’s interest on drawings of $700 was omitted from the current account.

What correction is required in that partner’s current account?

A debit $700
B credit $700
C debit $1400
D credit $1400

32. A partner’s salary of $12 000 was omitted from the current account.

What correction is required?

A debit current account $12 000
B credit current account $12 000
C debit drawings $12 000
D credit bank $12 000

33. A partner’s drawings of $9000 were wrongly credited to the current account.

What correction is required?

A debit current account $9000
B debit current account $18 000
C credit current account $9000
D credit current account $18 000

34. A partner’s share of profit of $17 000 was wrongly debited to the current account.

What correction is required?

A credit current account $17 000
B debit current account $17 000
C credit current account $34 000
D debit current account $34 000

35. A partner’s share of loss of $6000 was wrongly credited to the current account.

What correction is required?

A debit current account $6000
B credit current account $6000
C debit current account $12 000
D credit current account $12 000

36. A partner has opening current account credit balance $2400. Drawings $18 000. Interest on drawings $900. Interest on capital $3000. Salary $11 000. Share of loss $5000.

What is closing current account balance?

A $7500 debit
B $7500 credit
C $15 500 debit
D $15 500 credit

37. A partner has opening current account debit balance $5000. Drawings $20 000. Interest on drawings $1200. Interest on capital $4000. Salary $16 000. Profit share $9000.

What is closing current account balance?

A $2800 credit
B $2800 debit
C $14 200 credit
D $14 200 debit

38. A partnership has fixed capitals. A and B have capital balances of $70 000 and $50 000. Interest on capital is 10%. Profit before appropriations is $40 000. Residual profit is shared equally.

What amount is credited to A’s current account for interest on capital?

A $4000
B $5000
C $7000
D $20 000

39. Using the information in Question 38, what is A’s total credit to current account from appropriation?

A $14 000
B $21 000
C $27 000
D $34 000

40. A and B have fixed capitals of $60 000 and $40 000. Profit before appropriations is $9000. Interest on capital is 10%. Residual losses are shared equally.

What is A’s total appropriation credited to current account?

A $5500
B $6000
C $6500
D $7000

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. A and B have fixed capitals. A’s current account opening balance is $4000 credit. A’s interest on capital is $6000. A’s share of residual loss is $2500. A’s drawings are $7000.

What is A’s closing current account balance?

A $500 credit
B $500 debit
C $5500 credit
D $15 500 debit

42. A and B keep fixed capital accounts. B introduces extra capital of $20 000 and also makes drawings of $6000 during the year.

How are these recorded?

A both in B’s current account
B both in B’s capital account
C capital introduced in capital account, drawings in current account
D capital introduced in current account, drawings in capital account

43. A partnership changes from fluctuating capital accounts to fixed capital accounts.

Which account is usually opened to record future drawings and profit shares?

A suspense account
B current account
C revaluation account
D sales ledger control account

44. Which statement about fixed capital accounts is correct?

A capital balances remain unchanged unless capital is introduced or withdrawn permanently
B capital balances include all yearly drawings and profit shares
C current accounts are never required
D partner salaries are recorded in the income statement

45. Which statement about fluctuating capital accounts is correct?

A separate current accounts are always used
B annual profit shares and drawings are recorded in capital accounts
C capital accounts never change
D drawings are ignored

46. A partner’s current account is overdrawn by $3500 at year end.

How is this shown in the statement of financial position?

A as a current asset
B as a current liability
C as non-current liability
D as revenue income

47. A partner’s current account has a credit balance of $7800 at year end.

How is this shown in the statement of financial position?

A deducted from inventory
B as part of partners’ equity
C as a trade payable to suppliers
D as an expense

48. A partnership’s total fixed capital is $160 000. Partners’ current accounts show A $12 000 credit, B $5000 debit and C $8000 credit.

What is total partners’ equity?

A $145 000
B $160 000
C $175 000
D $185 000

49. A partnership’s total partners’ equity is $210 000. Fixed capital accounts total $190 000. Current accounts show Partner A credit $25 000 and Partner B debit $5000.

What is the net current account total?

A $20 000 credit
B $20 000 debit
C $30 000 credit
D $400 000 credit

50. Which transaction affects a partner’s capital account under both fixed and fluctuating capital methods?

A annual salary credited
B share of profit credited
C permanent capital introduced
D interest on drawings charged

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

1. C — additional capital introduced

• Under fixed capital accounts, the capital account usually records only:

  • original capital

  • additional permanent capital introduced

  • permanent capital withdrawn

• Drawings, salaries and interest are recorded in the current account.

2. B — partner’s share of profit

• Under fixed capital accounts, yearly profit appropriations go to the current account.

• This includes:

  • salary

  • interest on capital

  • share of profit

• Capital account stays fixed unless capital changes permanently.

3. B — profit shares are recorded in capital accounts

• Under fluctuating capital accounts, there are usually no separate current accounts.

• Drawings, profit shares, salaries and interest are all recorded in the capital account.

4. B — the partner has overdrawn from the business

• A debit current account means the partner owes the partnership.

• This usually happens when drawings and charges exceed profit share and other credits.

5. B — the business owes the partner

• A credit current account means the partner still has an amount due from the partnership.

• It is part of the partner’s claim/equity.

6. A — $20 300 credit

• Opening credit = $4200

• Add salary = $18 000

• Add interest on capital = $3000

• Add share of profit = $22 000

• Less drawings = $26 000

• Less interest on drawings = $900

• Closing balance = 4200 + 18 000 + 3000 + 22 000 – 26 000 – 900

• = $20 300 credit

7. A — $2900 credit

• Opening debit = $2500, so start as negative.

• Closing balance = -2500 + 12 000 + 15 000 – 21 000 – 600

• = $2900 credit

8. A — $5200 credit

• Opening credit = $6000

• Add salary = $10 000

• Add profit share = $14 000

• Less drawings = $24 000

• Less interest on drawings = $800

• Closing balance = 6000 + 10 000 + 14 000 – 24 000 – 800

• = $5200 credit

9. A — $4300 credit

• Opening debit = $3200

• Closing balance before interest on drawings:

• = -3200 + 2500 + 16 000 + 18 000 – 29 000

• = $4300 credit

10. A — $3600 credit

• Balance before interest on drawings = $4300 credit

• Interest on drawings = $700 debit

• Final balance = 4300 – 700

• = $3600 credit

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. C — $90 000

• Opening capital = $80 000

• Add additional capital = $15 000

• Less permanent withdrawal of capital = $5000

• Closing capital = 80 000 + 15 000 – 5000

• = $90 000

12. A — $1600 debit

• Opening current account = $4000 debit

• Add profit share = $18 000

• Less drawings = $15 000

• Less interest on drawings = $600

• Closing balance = -4000 + 18 000 – 15 000 – 600

• = $1600 debit

13. A — $75 200

• Opening capital = $70 000

• Add capital introduced = $10 000

• Add profit share = $20 000

• Less drawings = $24 000

• Less interest on drawings = $800

• Closing capital = 70 000 + 10 000 + 20 000 – 24 000 – 800

• = $75 200

14. D — drawings

• Drawings reduce the amount owed to the partner.

• Therefore, drawings are debited to the partner’s current account.

15. D — interest on capital

• Interest on capital is an appropriation credited to the partner.

• It increases the partner’s current account balance.

16. B — Debit appropriation account, credit partner current account

• Partner salary is an appropriation of profit.

• It is credited to the partner’s current account.

17. B — Debit partner current account, credit appropriation account

• Interest on drawings is charged to the partner.

• It reduces the partner’s entitlement.

• So the partner’s current account is debited.

18. A — Debit appropriation account, credit partner current account

• Interest on capital is given to the partner.

• It is credited to current account and debited to appropriation account.

19. B — Debit appropriation account, credit partner current account

• Share of residual profit increases the partner’s current account.

• It is credited to the partner.

20. A — Debit partner current account, credit bank

• Cash drawings reduce the partner’s claim.

• Bank decreases.

• Entry = debit current account, credit bank.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

21. A — Debit partner current account $1800, credit purchases $1800

• Goods taken by a partner are recorded at cost.

• Cost = $1800

• The selling price is irrelevant because no sale took place.

22. A — $10 400 credit

• Opening credit = $3000

• Add salary = $9000

• Add interest on capital = $2400

• Add residual profit = $8500

• Less drawings = $12 000

• Less interest on drawings = $500

• Closing balance = 3000 + 9000 + 2400 + 8500 – 12 000 – 500

• = $10 400 credit

23. A — $7200 debit

• Opening debit = $1500

• Add salary = $6000

• Add interest on capital = $1800

• Less share of residual loss = $3500

• Less drawings = $10 000

• Closing balance = -1500 + 6000 + 1800 – 3500 – 10 000

• = $7200 debit

24. A — debit side of current account

• A partner’s share of loss reduces the amount owed to the partner.

• Therefore, it is debited to the current account.

25. A — debit side of capital account

• Under fluctuating capital accounts, drawings are recorded in the capital account.

• Drawings reduce capital, so they are debited.

26. C — $108 000

• Capital account = $100 000

• Current account credit = $8000

• Total claim = 100 000 + 8000

• = $108 000

27. A — $69 000

• Capital account = $75 000

• Current account debit = $6000

• Net claim = 75 000 – 6000

• = $69 000

28. C — $106 500

• Opening capital = $90 000

• Add salary = $14 000

• Add interest on capital = $4500

• Add profit share = $16 000

• Less drawings = $18 000

• Closing capital = 90 000 + 14 000 + 4500 + 16 000 – 18 000

• = $106 500

29. A — $48 000 credit

• Opening capital = $60 000

• Add additional capital = $12 000

• Less drawings = $15 000

• Less share of loss = $9000

• Closing capital = 60 000 + 12 000 – 15 000 – 9000

• = $48 000 credit

30. A — debit $2000

• Interest on capital credited = $5000

• Correct amount = $3000

• Overcredited by $2000

• Correct by debiting the current account $2000.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

31. A — debit $700

• Interest on drawings is charged to the partner.

• It should be debited to the current account.

32. B — credit current account $12 000

• Partner salary is credited to current account.

• It increases the partner’s entitlement.

33. B — debit current account $18 000

• Drawings should have been debited $9000.

• They were wrongly credited $9000.

• To reverse and correct, debit double:

• 9000 + 9000 = $18 000

34. C — credit current account $34 000

• Profit share should have been credited $17 000.

• It was wrongly debited $17 000.

• Correction = credit double the amount:

• 17 000 + 17 000 = $34 000

35. C — debit current account $12 000

• Share of loss should be debited $6000.

• It was wrongly credited $6000.

• Correction = debit double:

• 6000 + 6000 = $12 000

36. A — $7500 debit

• Opening credit = $2400

• Add interest on capital = $3000

• Add salary = $11 000

• Less drawings = $18 000

• Less interest on drawings = $900

• Less share of loss = $5000

• Closing balance = 2400 + 3000 + 11 000 – 18 000 – 900 – 5000

• = $7500 debit

37. A — $2800 credit

• Opening debit = $5000

• Add interest on capital = $4000

• Add salary = $16 000

• Add profit share = $9000

• Less drawings = $20 000

• Less interest on drawings = $1200

• Closing balance = -5000 + 4000 + 16 000 + 9000 – 20 000 – 1200

• = $2800 credit

38. C — $7000

• A’s capital = $70 000

• Interest on capital = 10% × 70 000

• = $7000

39. B — $21 000

• Total interest on capital:

  • A = $7000

  • B = $5000

  • Total = $12 000

• Residual profit = 40 000 – 12 000 = $28 000

• A residual share = 28 000 / 2 = $14 000

• A total credit = 7000 + 14 000

• = $21 000

40. A — $5500

• A interest on capital = 10% × 60 000 = $6000

• B interest on capital = 10% × 40 000 = $4000

• Total interest = $10 000

• Profit before appropriations = $9000

• Residual loss = $1000

• A’s share of residual loss = $500

• A total appropriation = 6000 – 500

• = $5500

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. A — $500 credit

• Opening credit = $4000

• Add interest on capital = $6000

• Less share of residual loss = $2500

• Less drawings = $7000

• Closing balance = 4000 + 6000 – 2500 – 7000

• = $500 credit

42. C — capital introduced in capital account, drawings in current account

• Under fixed capitals:

  • extra permanent capital goes to capital account

  • drawings go to current account

43. B — current account

• When fixed capital accounts are used, current accounts record future:

  • drawings

  • salaries

  • interest on capital

  • interest on drawings

  • profit/loss shares

44. A — capital balances remain unchanged unless capital is introduced or withdrawn permanently

• Fixed capital accounts stay fixed.

• Only permanent changes in capital affect them.

45. B — annual profit shares and drawings are recorded in capital accounts

• In fluctuating capital accounts, all partner movements are recorded in the capital account.

• No separate current account is normally needed.

46. A — as a current asset

• A debit current account means the partner owes the business.

• This is shown as a current asset.

47. B — as part of partners’ equity

• A credit current account is part of the partner’s claim on the partnership.

• It is shown in partners’ equity.

48. C — $175 000

• Fixed capital = $160 000

• Add current account credits:

  • A = $12 000

  • C = $8000

• Less current account debit:

  • B = $5000

• Total equity = 160 000 + 12 000 – 5000 + 8000

• = $175 000

49. A — $20 000 credit

• Total partners’ equity = $210 000

• Fixed capital total = $190 000

• Net current accounts = 210 000 – 190 000

• = $20 000 credit

50. C — permanent capital introduced

• Permanent capital introduced affects capital accounts under both methods.

• Salaries, profit shares and interest on drawings affect current accounts under fixed capital method, but capital accounts under fluctuating method.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.