A debit balance on a partner's current account must indicate that _________.

they have withdrawn more than they have earned in the partnership

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they have a credit balance on their capital account

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drawings are higher than the profit share for that year

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they are insolvent

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Solution

The correct option is B they have withdrawn more than they have earned in the partnership
A debit balance in the current account indicates that the partner has withdrawn too much money or goods in anticipation of profits. His drawings are greater than the amount of profits due to him, and he becomes a temporary debtor of the business. Hence, a debit balance in a partner’s current account appears as a current asset on the balance sheet.

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