Read the passage given below and answer the question.
Teesha and Ritik are partners in a firm without any agreement. Due to lack of agreement they realised that there was contradiction between them on one issue or the other so they decided to enter into a written agreement with regard to different terms and conditions.
As per the agreement they will be sharing profits in the ratio of 3 : 2. At the beginning of 2022-2023 i.e. 1st April 2022 their capital were ₹60,000 and ₹40,000 respectively. They earn a profit of ₹30,000 for the year ending 31st March 2023. According to agreement, both Teesha and Ritik are entitled to ₹1,000 per month as salary and 5% p.a interest on their capital. They are also to be charged an interest of 5% p.a on their drawings, which was ₹12,000 for Teesha and ₹8,000 for Ritik for the year 2022-2023.
Identify the account in which salary of Teesha will be transferred, when capitals are fixed.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Current account
Under the fixed capital method the capital account shows only the capital introduced or withdrawn. Every other item of the partner – salary, commission, interest on capital, drawings, interest on drawings and share of profit – goes to a separate Partner’s Current Account.
Option (1) Profit and loss account — Incorrect. Partner’s salary is an appropriation of profit, debited to the Profit and Loss Appropriation Account, not a charge in the Profit and Loss Account.
Option (2) Realisation account — Incorrect. A Realisation Account is opened only on dissolution of the firm.
Option (3) Capital account — Incorrect. Salary is credited to the capital account only when capitals are fluctuating.
NCERT (2026-27 edition): |