List any two items shown on the credit side of Profit and Loss Appropriation Account.
Answer:- i) Net Profit for the year ii) Interest on Drawings
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Mittal & Sons earned a profit of ₹ 2,75,000 during the year ended 31st March, 2016. 10% of this profit was to be transferred to Investment Fluctuation Reserve. Pass the necessary Journal entry for the same.
Ans:- Date Particulars L.F Dr. (₹) Cr. (₹) March, 31 Profit & Loss Appropriation A/c …Dr. To Investment Fluctuation Reserve A/c (Being 10% of Profit transferred to Investment Fluctuation Reserve) 27,500 27,500
State any three items shown on the debit side of the Capital Account of a partner when the capitals are fluctuating.
Answer:- Items that may be shown on the debit side of the Capital Account of a partner are: i) Drawings ii) Interest on drawings iii) Share of Loss
List any two items which may appear on the credit side of a Partner’s Fixed Capital Account.
Answer:- i) Cash/Bank A.c (Introduction of Capital) ii) Opening Balance of Partner’s Fixed Capital Account
State two differences between interest on capital allowed to partners and interest on drawings charged from partners.
Answer:- i) Interest on capital is allowed (paid) by the firm to the partners whereas interest on drawings is charged by the firm. ii) Interest on drawings is credited to Profit and Loss Appropriation Account and interest on capital is…
List two instances when a partner’s fixed capital may change.
Two instances in which the fixed capitals of partners may change are: i) When additional capital is introduced by the partners. ii) When a part of the capital is withdrawn by the partners.
Give two differences between Fixed and Fluctuating Capital Accounts
Answer:- Basis Fixed Capital Account Fluctuating Capital Account No. of Accounts maintained Each partner has two accounts: i) Capital Account and ii) Current Account Each Partner has only one account, i.e., Capital Account. Frequency of Change Under this method, the…
Give one difference between Partner’s Capital Account and Current Account.
Capital Account shows the transactions relating to the introduction or withdrawal of capital whereas Current Account shows the transactions sich as interest on capital, drawings, salary, commission, the share of profit/Loss, etc.
Interest allowed on capital is debited to Profit and Loss Appropriation Account and not to Profit and Loss Account. Why?
Answer:- Interest allowed on capital is debited to Profit and Loss Appropriation Account because it is an appropriation of profit and not a charge against profit.
Is there any situation where interest allowed on capital is debited to Profit and Loss Account?
Yes, it is debited to Profit and Loss Account if the Partnership Deed provides that it is to be paid whether the firms earns profit on not.