Target Exam

CUET

Subject

-- Accountancy Part A

Chapter

Accounting for Partnership

Question:

The opening balance of Partner's Capital Account is credited with:

Options:

Interest on Capital

Interest on Drawings

Drawings

Share in Loss

Correct Answer:

Interest on Capital

Explanation:

The correct answer is option 1- Interest on Capital.

In a partnership firm, the Partner's Capital Account reflects the balance of each partner's capital in the business, including various adjustments.

1. Interest on Capital: This is the interest paid by the firm to the partners on their capital invested in the business. It is credited to the Partner's Capital Account because it increases the partner's share of the capital. 

2. Interest on Drawings: This is the interest charged by the firm on the drawings made by the partners. It is not credited to the Partner's Capital Account; instead, it is debited to the Account as it decreases the capital balance of partner.

3. Drawings: These are the amounts withdrawn by the partners from the firm for personal use. Drawings are debited to the Partner's Capital Account because they reduce the capital of the partner.

4. Share in Loss: This refers to the partner’s share of the losses incurred by the firm. It is debited to the Partner’s Capital Account because it decreases the partner's share of the capital.

Therefore, the item that will be credited to the Partner's Capital Account is Interest on Capital.