Target Exam

CUET

Subject

-- Accountancy Part A

Chapter

Reconstitution of Partnership Firm: Retirement and Death

Question:

Which of the following entry shows withdrawal of excess capital by partner's?

Options:

Partner's capital A/c is debited and Cash/Bank A/c is credited

Cash/Bank A/c is debited and partner's capital A/c is credited

Drawings A/c is debited and profit and loss A/c is credited

Profit and loss A/c is debited and Drawings A/c is credited

Correct Answer:

Partner's capital A/c is debited and Cash/Bank A/c is credited

Explanation:

The correct answer is option 1- Partner's capital A/c is debited and Cash/Bank A/c is credited.

The journal entry 'Partner's capital A/c is debited and Cash/Bank A/c' is credited shows withdrawal of excess capital by partner's.

 

When a partner withdraws excess capital, it means capital is being reduced and cash is going out of the business. So the journal entry is:
Partner’s Capital A/c     Dr.  ₹XXX
          To Cash/Bank A/c           ₹XXX

 Partner's Capital A/c is debited → to reduce the partner's capital.
Cash/Bank A/c is credited → because money is going out.