While making an adjusting entry in respect of capital, we credit _________________.

Interest on capital account

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Capital account

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Profit and loss account

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Drawing account

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Solution

The correct option is B Capital account
While making an adjusting entry in respect of capital, we credit the capital account.
It is treated like any other expenses and it is debited to profit and loss account and credited to the capital account.

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A and B were partners in a firm sharing profits and losses equally. Their firm was dissolve on 15th March, 2014, which resulted in a loss of Rs. 30,000. On that date the capital account of A showed a credit balance of Rs. 20,000 and that of B a credit balance of Rs. 30,000. The cash account had a balance of Rs. 20,000.
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