CUET UG Accountancy Booster Test 1 Capital Accounts of Partners -

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CUET UG Accountancy Booster Test 1 Capital Accounts of Partners

⏱️ 30 Minutes

❓ 20 Questions

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Accountancy Booster Test 1 Capital Accounts of Partners

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QUESTION 1 OF 20

Beyond merely recording investments, how do capital accounts serve the partnership firm functionally?

Answer Review

1 Beyond merely recording investments, how do capital accounts serve the partnership firm functionally?

A They act as the firm's bank account.

B They track the financial equity and net claims of each partner against the firm's assets.

C They are solely used to calculate income tax.

D They record the daily inventory consumption by partners.

💡 Short Explanation

Capital accounts represent partner equity. They track claims against firm assets. Help determine ownership position.

✅ Correct Answer Explanation

Capital accounts record the financial interest and ownership claim of each partner in the business. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Bank account is separate.
Option C → Not limited to taxation.
Option D → Inventory consumption unrelated.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Identify real function of capital accounts.

Final Logic:

�� Capital accounts represent partner equity.

🧠 Memory Trick

"Capital Account = Ownership Record"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Purpose of Capital Accounts – Page reference may vary by edition.

2 Which of the following correctly identifies a transaction that belongs in a partner's capital/current account versus the firm's regular P&L account?

A Audit fees

B Interest on loan from a bank

C Commission payable to a partner for generating sales

D Depreciation on machinery

💡 Short Explanation

Partner commission affects partner accounts. Normal expenses belong to P&L. Partner appropriations handled separately.

✅ Correct Answer Explanation

Commission payable to a partner is a partner-related appropriation and is recorded in partner accounts. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Audit fees are business expenses.
Option B → Bank loan interest is expense.
Option D → Depreciation belongs to P&L.

🎯 Strategy

Used

Elimination

Application:

�� Distinguish partner transactions from business expenses.

Final Logic:

�� Partner commission affects capital/current account.

🧠 Memory Trick

"Partner Items Go to Partner Accounts"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Transactions Recorded – Page reference may vary by edition.

3 In a fixed capital system, if Opening Capital is C, Additional Capital is A, and permanent Withdrawal of Capital is W, which formula gives the Closing Capital (CC)?

A CC = C + A + Profit - W

B CC = C - A + W

C CC = C + Profit - W

D CC = C + A - W

💡 Short Explanation

Fixed capital changes only permanently. Additional capital increases balance. Permanent withdrawal reduces balance.

✅ Correct Answer Explanation

Under fixed capital method: [CC = C + A - W] Regular profits are not directly added to fixed capital. CC = C + A - W Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Profit not added directly.
Option B → Additional capital increases balance.
Option C → Ignores additional capital.

🎯 Strategy

Used

Formula Recognition

Application:

�� Recall fixed capital adjustment formula.

Final Logic:

�� Only permanent changes affect fixed capital.

🧠 Memory Trick

"Fixed = Permanent Changes Only"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Fixed Capital Method – Page reference may vary by edition.

4 Identify the correct statement(s) regarding fluctuating capital accounts:
(i) Interest on drawings decreases the capital balance.
(ii) Partner's salary decreases the capital balance.
(iii) Share of firm's loss increases the capital balance.

A Only (i) is correct

B Only (ii) and (iii) are correct

C Only (i) and (iii) are correct

D All are correct

💡 Short Explanation

Interest on drawings reduces capital. Salary increases capital. Loss decreases capital.

✅ Correct Answer Explanation

Statement (i) is correct because interest on drawings reduces partner balance. Statement (ii) is incorrect because salary increases capital. Statement (iii) is incorrect because loss decreases capital. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Statements incorrect.
Option C → Loss does not increase capital.
Option D → Only one statement correct.

🎯 Strategy

Used

Statement Verification

Application:

�� Check impact of each item on capital.

Final Logic:

�� Only interest on drawings decreases balance.

🧠 Memory Trick

"Drawings Reduce, Salary Adds"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Fluctuating Capital Method – Page reference may vary by edition.

5 Assertion (A): A fixed capital account changes when a partner takes normal drawings against anticipated profits.
Reason (R): Drawings against anticipated profits are recorded in the partner's current account, not the fixed capital account.

A Both A and R are true.

B Both A and R are false.

C A is true, but R is false.

D A is false, but R is true.

💡 Short Explanation

Fixed capital remains unchanged. Drawings go to current account. Reason correctly explains.

✅ Correct Answer Explanation

Assertion is false because normal drawings do not affect fixed capital. Reason is true because drawings are recorded in Current Account. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Assertion false.
Option B → Reason true.
Option C → Reason not false.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Verify each statement independently.

Final Logic:

�� Drawings affect Current Account only.

🧠 Memory Trick

"Normal Drawings Never Touch Fixed Capital"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Separate Current Account – Page reference may vary by edition.

6 Match the following regarding the separate accounts.

List 1	List 2
1. Current A/c Debit side	a. Share of Profit
2. Current A/c Credit side	b. Interest on Drawings
3. Balance Sheet Assets	c. Current A/c Credit Balance
4. Balance Sheet Liabilities	d. Current A/c Debit Balance

A 1-a, 2-b, 3-c, 4-d

B 1-b, 2-a, 3-d, 4-c

C 1-c, 2-d, 3-a, 4-b

D 1-d, 2-c, 3-b, 4-a

💡 Short Explanation

Interest on drawings debited. Profit share credited. Debit balance shown as asset.

✅ Correct Answer Explanation

Correct matching: Debit side → Interest on drawings Credit side → Share of profit Asset side → Debit balance Liability side → Credit balance Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Debit-credit reversed.
Option C → Incorrect asset/liability matching.
Option D → Entire sequence incorrect.

🎯 Strategy

Used

Option Grouping

Application:

�� Match debit-credit effects carefully.

Final Logic:

�� Correct account classification gives Option B.

🧠 Memory Trick

"Debit Balance = Asset"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Balance Sheet Treatment – Page reference may vary by edition.

7 Sequence the accounting entries for transferring profit to fixed capital method partners:
1. Ascertain Net Profit in P&L Account.
2. Transfer profit share to Partners' Current Accounts.
3. Prepare P&L Appropriation Account.

A 2, 3, 1

B 1, 2, 3

C 1, 3, 2

D 3, 1, 2

💡 Short Explanation

Profit determined first. Appropriation account prepared next. Profit transferred finally.

✅ Correct Answer Explanation

Correct sequence: Ascertain net profit Prepare appropriation account Transfer share to Current Accounts Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Profit transfer cannot occur first.
Option B → Appropriation account missing before transfer.
Option D → Appropriation prepared after profit ascertainment.

🎯 Strategy

Used

Sequential Logic

Application:

�� Arrange accounting procedure correctly.

Final Logic:

�� Profit must first be determined.

🧠 Memory Trick

"Profit → Appropriation → Transfer"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Profit Entries – Page reference may vary by edition.

8 X withdrew Rs 50,000 permanently out of his capital. Under the fixed method, what is the exact journal entry?

A Debit X's Capital Account, Credit Bank Account

B Debit X's Current Account, Credit Bank Account

C Debit Bank Account, Credit X's Capital Account

D Debit X's Capital Account, Credit X's Current Account

💡 Short Explanation

Permanent withdrawal reduces fixed capital. Cash leaves business. Capital account debited.

✅ Correct Answer Explanation

Permanent capital withdrawal directly reduces Capital Account. Journal Entry: X's Capital A/c Dr. To Bank A/c Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Current account used for normal drawings.
Option C → Reverse entry.
Option D → No cash movement shown.

🎯 Strategy

Used

Journal Entry Recognition

Application:

�� Identify permanent withdrawal treatment.

Final Logic:

�� Fixed capital must decrease.

🧠 Memory Trick

"Permanent Withdrawal Hits Capital"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Drawings Adjustments – Page reference may vary by edition.

9 Y's current account has a debit balance of Rs 5,000. He is allowed a salary of Rs 12,000 and his share of loss is Rs 8,000. What is the new balance of his current account?

A Rs 1,000 Credit

B Rs 1,000 Debit

C Rs 9,000 Credit

D Rs 9,000 Debit

💡 Short Explanation

Salary increases balance. Loss decreases balance. Final balance remains debit.

✅ Correct Answer Explanation

Calculation: Opening Debit = 5,000 Add Loss = 8,000 Debit Less Salary = 12,000 Credit Net Balance: 5000 + 8000 - 12000 = 1000 Debit 5000 + 8000 - 12000 = 1000 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Balance remains debit.
Option C → Incorrect calculation.
Option D → Overcalculation.

🎯 Strategy

Used

Substitution

Application:

�� Adjust debits and credits properly.

Final Logic:

�� Final balance = Rs. 1,000 Debit.

🧠 Memory Trick

"Salary Credits, Loss Debits"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Debit and Credit Balances – Page reference may vary by edition.

10 If a firm uses the fluctuating capital method and a partner's account ends in a debit balance due to severe losses, where is it presented in the final accounts?

A P&L Appropriation Account debit side

B Balance Sheet liabilities side as a deduction from other partner's capital

C Trading Account

D Balance Sheet assets side

💡 Short Explanation

Debit balance means recoverable amount. Partner owes firm money. Shown as asset.

✅ Correct Answer Explanation

A debit balance under fluctuating method indicates amount receivable from partner and appears on the assets side. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Not part of appropriation.
Option B → Not deducted from others.
Option C → Trading account unrelated.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Identify nature of debit balance.

Final Logic:

�� Receivable from partner = asset.

🧠 Memory Trick

"Debit Partner = Firm's Asset"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Balance Sheet Treatment – Page reference may vary by edition.

11 Which specific accounting principle justifies merging all partner transactions into a single account under the fluctuating method?

A It provides a consolidated view of the partner's total net claim or obligation to the firm at any given time.

B It prevents the partner from withdrawing cash.

C It is mandated by the Income Tax Act.

D It ensures the capital balance never goes into negative.

💡 Short Explanation

One account shows total position. Combines all adjustments together. Simplifies accounting.

✅ Correct Answer Explanation

The fluctuating method combines all transactions into one account to reflect the partner's net claim or obligation. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Withdrawals still allowed.
Option C → Income Tax Act irrelevant.
Option D → Debit balances possible.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Identify accounting purpose behind single account system.

Final Logic:

�� One account provides consolidated view.

🧠 Memory Trick

"One Account Shows Everything"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Single Account System – Page reference may vary by edition.

12 Under the fluctuating method, consider these statements:
(i) Capital account acts as both capital and current account.
(ii) Opening capital and accumulated profits are separated.
(iii) It is easier to maintain as it requires fewer ledgers.

A Only (i) and (ii) are correct

B Only (ii) and (iii) are correct

C Only (i) and (iii) are correct

D All statements are correct

💡 Short Explanation

One account handles everything. Fewer ledgers required. Opening capital not separated.

✅ Correct Answer Explanation

Statement (i) is true because one account performs both functions. Statement (ii) is false because balances are combined. Statement (iii) is true because fewer accounts are maintained. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Statement ii false.
Option B → Statement i true.
Option D → Statement ii incorrect.

🎯 Strategy

Used

Statement Verification

Application:

�� Check accuracy of each statement.

Final Logic:

�� Only statements i and iii are correct.

🧠 Memory Trick

"Fluctuating = Fewer Ledgers"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Fluctuating Capital Method – Page reference may vary by edition.

13 Assertion (A): In the fluctuating capital method, the share of profit from P&L Appropriation is credited directly to the Capital Account.
Reason (R): The fluctuating method utilizes a separate current account to isolate profit entries.

A Both A and R are true, and R explains A.

B Both A and R are true, but R does not explain A.

C A is true, but R is false.

D A is false, but R is true.

💡 Short Explanation

Profit directly credited to capital. No separate current account exists. Reason false.

✅ Correct Answer Explanation

Assertion is true because fluctuating method records profits directly in Capital Account. Reason is false because no separate Current Account exists. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Reason incorrect.
Option B → Reason false.
Option D → Assertion true.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Verify truthfulness separately.

Final Logic:

�� Fluctuating method uses single account only.

🧠 Memory Trick

"Fluctuating = No Current Account"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Profit and Loss Entries – Page reference may vary by edition.

14 Match the following scenarios to their treatment.

List 1	List 2
1. Fluctuating Method	a. Decreases Capital permanently
2. Interest on Drawings	b. Decreases capital temporarily
3. Permanent Withdrawal	c. One Account
4. Normal Drawings	d. Cost to partner for using firm's money

A 1-d, 2-c, 3-b, 4-a

B 1-c, 2-d, 3-a, 4-b

C 1-a, 2-b, 3-c, 4-d

D 1-b, 2-a, 3-d, 4-c

💡 Short Explanation

Fluctuating uses one account. Interest on drawings is cost. Permanent withdrawal reduces capital permanently.

✅ Correct Answer Explanation

Correct matching: Fluctuating Method → One account Interest on Drawings → Cost to partner Permanent Withdrawal → Permanent decrease Normal Drawings → Temporary decrease Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Entire sequence incorrect.
Option C → Wrong account matching.
Option D → Incorrect classification.

🎯 Strategy

Used

Option Grouping

Application:

�� Match accounting effects logically.

Final Logic:

�� Correct conceptual pairing gives Option B.

🧠 Memory Trick

"Permanent Means Permanent Reduction"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Drawings and Interest – Page reference may vary by edition.

15 A firm transitions from fixed to fluctuating capital. If it had 3 partners, how many equity-related ledgers will be closed (reduced) as a result of this transition?

A 0

B 1

C 2

D 3

💡 Short Explanation

Fixed method has Current Accounts. Fluctuating removes separate Current Accounts. One current account per partner closes.

✅ Correct Answer Explanation

With 3 partners, 3 separate Current Accounts become unnecessary under fluctuating method. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Accounts do reduce.
Option B → Only one account not sufficient.
Option C → There are three partners.

🎯 Strategy

Used

Logical Counting

Application:

�� Count accounts eliminated.

Final Logic:

�� One Current Account per partner closes.

🧠 Memory Trick

"Fluctuating Removes Current Accounts"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Number of Accounts – Page reference may vary by edition.

16 Arrange the steps of adjusting a fluctuating capital account at year-end:
1. Credit Salary and Commission
2. Debit Drawings and Interest on Drawings
3. Credit Share of Divisible Profit

A 1, 2, 3

B 3, 1, 2

C 2, 3, 1

D 3, 2, 1

💡 Short Explanation

Salary and commission credited first. Drawings deducted next. Final profit credited afterward.

✅ Correct Answer Explanation

Correct sequence: Credit salary and commission Debit drawings and interest Credit share of divisible profit Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Drawings should come earlier.
Option C → Credits usually entered before deductions.
Option D → Incorrect sequence.

🎯 Strategy

Used

Sequential Logic

Application:

�� Arrange account adjustments properly.

Final Logic:

�� Salary and commission first, profit last.

🧠 Memory Trick

"Credit Benefits Before Final Profit"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Treatment of Items – Page reference may vary by edition.

17 Z has an opening fixed capital of Rs 4,00,000. During the year, he introduces Rs 50,000 as additional capital and withdraws Rs 20,000 permanently from his capital. He earns Rs 10,000 profit. What is his closing Fixed Capital balance?

A Rs 4,40,000

B Rs 4,30,000

C Rs 4,50,000

D Rs 4,20,000

💡 Short Explanation

Additional capital increases fixed balance. Permanent withdrawal reduces it. Profit ignored in fixed capital.

✅ Correct Answer Explanation

Calculation: [400000 + 50000 - 20000 = 430000] Profit is credited to Current Account, not Fixed Capital. 400000 + 50000 - 20000 = 430000 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Miscalculation.
Option C → Ignores withdrawal.
Option D → Ignores additional capital.

🎯 Strategy

Used

Substitution

Application:

�� Include only permanent adjustments.

Final Logic:

�� Closing fixed capital = Rs. 4,30,000.

🧠 Memory Trick

"Profit Never Changes Fixed Capital"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Fixed Balance Nature – Page reference may vary by edition.

18 Under fluctuating capital, if Opening Capital is 'O', Profit is 'P', Drawings are 'D', what is Closing Capital 'C' assuming no other adjustments?

A C = O + D - P

B C = O - P - D

C C = O + P + D

D C = O + P - D

💡 Short Explanation

Profit increases capital. Drawings reduce capital. Net effect gives closing balance.

✅ Correct Answer Explanation

Formula: [C = O + P - D] C = O + P - D Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Profit and drawings reversed.
Option B → Profit should increase capital.
Option C → Drawings should reduce capital.

🎯 Strategy

Used

Formula Recognition

Application:

�� Identify fluctuating capital formula.

Final Logic:

�� Add profits, deduct drawings.

🧠 Memory Trick

"Profit Adds, Drawings Reduce"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Fluctuating Balance Nature – Page reference may vary by edition.

📄 Passage

"Under the fluctuating capital method, only one account, i.e. capital account is maintained for each partner. All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc are recorded directly in the capital accounts of the partners. This makes the balance in the capital account to fluctuate from time to time. That's the reason why this method is called fluctuating capital method."

According to the passage, the fluctuating nature is caused by direct adjustments. In contrast, under the fixed capital method, what is done to prevent the capital balance from fluctuating from these daily adjustments?

A Adjustments are ignored.

B Adjustments are subtracted from assets.

C Adjustments are diverted to a separate current account.

D Adjustments are made directly in the balance sheet.

💡 Short Explanation

Fixed capital remains stable. Separate Current Account used. Daily adjustments diverted there.

✅ Correct Answer Explanation

Under fixed capital method, regular adjustments are recorded in Current Accounts instead of Capital Accounts. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Adjustments are not ignored.
Option B → Assets not adjusted directly.
Option D → Balance sheet treatment incorrect.

🎯 Strategy

Used

Passage-Based Extraction

Application:

�� Compare fixed and fluctuating methods.

Final Logic:

�� Current Account prevents fluctuation.

🧠 Memory Trick

"Current Account Prevents Fluctuation"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Credit Balance in Fixed – Page reference may vary by edition.

📄 Passage

Based on the passage, if a partner's "drawings" and "interest on drawings" significantly exceed their "opening balance", "salary", and "share of profit", what will happen to their single capital account?

A It will result in a debit balance.

B It will remain fixed.

C It will automatically be converted to a fixed capital account.

D It will be written off as a bad debt.

💡 Short Explanation

Excess deductions reduce capital heavily. Negative balance may occur. Fluctuating account can become debit.

✅ Correct Answer Explanation

When drawings and related charges exceed credits, the capital account may show a debit balance. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Fluctuating accounts do not remain fixed.
Option C → No automatic conversion exists.
Option D → Not treated as bad debt automatically.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Analyze effect of excessive deductions.

Final Logic:

�� Large deductions create debit balance.

🧠 Memory Trick

"Too Many Drawings = Debit Capital"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Debit Possibility in Fluctuating – Page reference may vary by edition.

CUET UG Accountancy Booster Test 1 Capital Accounts of Partners

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