Question

In the books of a partnership firm maintaining fluctuating capital accounts, which of the following appropriations or adjustments would result in a credit to the Partners' Current Accounts?

• A. Interest allowed on partners' capitals
• B. Remuneration, salary or commission payable to partners
• C. Share of divisible profits transferred to partners
• D. All of the above items

Hint:

Fixed capital method → Current Account used for all adjustments. Fluctuating capital method → everything goes to Capital Account.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
In a partnership firm, appropriations represent distributions of profit to the partners. These are credited to the partners' capital (or current) accounts because they increase the amount the firm owes the partner.
Step 2: Detailed Explanation:
- Interest on Capital (A): This is an income for the partner and is credited to their account.
- Remuneration/Salary/Commission (B): These are payments due to the partner for services rendered, increasing their capital balance.
- Share of Profits (C): This is the partner’s portion of the firm's earnings, which increases their equity in the firm.
Since all these items represent an increase in the partner's claim against the firm, they are all credited to the partner's account.

Step 3: Final Answer:
The correct answer is (D) All of the above items.