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Question
Answer briefly of the following question :
Give the adjusting entry and closing entry for interest on loan taken by a partner from the firm, when the firm
follows the Fluctuating Capital Method.
Solution
Adjusting entry:
Partner's Capital A/c ......... Dr.
To Interest on Loan A/c
Closing entry:
Interest on Loan A/c .......... Dr.
To Profit & Loss A/c
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RELATED QUESTIONS
A and B were partners in a firm sharing profits in the ratio of 4:5. During the year ended 31-3-2015 A withdrew Rs.19,000. Interest on A's drawings was Rs.700.
Pass necessary Journal entry for charging interest on A's drawings assuming that the capitals of the partners were fixed.
Distinguish between ‘Fixed Capital Account’ and ‘Fluctuating Capital Account’ on the basis of credit balance
Kavita, Ravita and Sunita were partners in a firm sharing profits in 2:1:2 ratio. On 31.3.2014 their Balance Sheet was as follows :
| Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Creditors Bills Payable Capitals Kavita 1,40,000 Ravita 1,80,000 Sunita 90,000 |
83,000 19,000
4,10,000 |
Cash Debtors Bills payable Furniture Machinery Agarwal’s Capital |
45,000 34,000 15,000 2,10,000 2,00,000 8,000 |
| 5,12,000 | 5,12,000 |
On 31.9.2014, Sunita died. The partnership deed provided for the following to the executors of the deceased partner:
(a) Her share in the goodwill of the firm, calculated on the basis of three years' purchase of the average profits of the last four years. The profits of the last four years were Rs 1,98,000; Rs 2,24,000: Rs 2,76,000 and Rs 3,27,000 respectively.
(b) Her share in the profit of the firm till the date of her death, calculated on the basis of the average profits of the last four years.
(c) Interest @ 6% per annum on the credit balance, if any, in her Capital account.
(d) Interest on her loan @ 12% per annum.
Prepare Sunita's Capital Account to be presented to her executors
Answer in one sentence only.
What is Fluctuating Capital Method?
Give the word / term or phrase which can substitute the following statement.
Under this method capital balances of partner remain constant.
State whether the following statement are True or False.
Capital account always shows credit balance.
Write the word/phrase/term, which can substitute the following sentence.
Such capital method in which only Capital Account is maintained for each partner.
Answer in one sentence only.
When is Partners Current Account is opened?
Answer in one sentence only:
What is fluctuating capital?
Answer in one sentence only:
What is fluctuating capital?
