Question

Mohan, a partner is to bear realisation expenses and he was allowed ₹ 10,000 as remuneration and expense. Actual expenses paid by the firm were ₹ 17,500. Mohan’s Capital Account will be ______.

Answer 1

Mohan, a partner is to bear realisation expenses and he was allowed ₹ 10,000 as remuneration and expense. Actual expenses paid by the firm were ₹ 17,500. Mohan’s Capital Account will be debited by ₹ 7,500.

Explanation:

Since Mohan agreed to bear all realisation expenses for a fixed remuneration of ₹ 10,000, any expense beyond this amount is his personal responsibility. When the firm pays the actual expense of ₹ 17,500, it is paying ₹ 7,500 extra on Mohan’s behalf. This extra payment is treated as a personal drawing and is debited to Mohan’s Capital Account.