Aminu and Folake are partners in a firm. On 1st January 2025, Aminu's fixed capital account balance was and his current account had a credit balance of . On 1st July 2025, Aminu introduced additional capital of . The partnership agreement provides for interest on capital at per annum, an annual salary to Aminu of , interest on drawings of , and a share of residual profit of . Aminu's drawings during the year amounted to . If the firm converts to a fluctuating capital account system at the end of the year, what is the closing balance of Aminu's capital account at 31st December 2025?
Answer: 2143000 ₦
Answer
The closing balance of Aminu's fluctuating capital account at 31st December 2025 is ₦2,143,000.
The closing balance under the fluctuating capital account system combines all partner equity transactions into a single account. Opening capital (₦1,200,000), opening credit current account balance (₦150,000), additional capital (₦300,000), interest on capital (₦135,000), partner salary (₦200,000), and share of profit (₦350,000) are credited, giving total credits of ₦2,335,000. Drawings (₦180,000) and interest on drawings (₦12,000) are debited (totaling ₦192,000). The net closing balance is ₦2,335,000 - ₦192,000 = ₦2,143,000.
Step-by-Step Solution
Key Concept
Under a fluctuating capital account system, all capital additions, initial current account balances, share of profits, salaries, interest on capital, drawings, and interest on drawings are recorded directly in a single capital account.