Question

Which of the following is true regarding salary to a partner when the firm maintains fluctuating capital accounts?

Options

• Debit Partner’s Loan A/c and Credit Profit and Loss Appropriation A/c.

• Debit Profi and Loss A/c and Credit Partner’s Capital A/c.

• Debit Profit and Loss Appropriation A/c and Credit Partner’s Current A/c.

• Debit Profit and Loss Appropriation A/c and Credit Partner’s Capital A/c.

Answer 1

Debit Profit and Loss Appropriation A/c and Credit Partner’s Capital A/c.

Explanation:

In fluctuating capital accounts, a partner’s salary is considered an appropriation of profits, so it is debited to the Profit and Loss Appropriation A/c and credited to the partner’s Capital A/c (not Current A/c).