Ngozi and Emeka are partners in a firm maintaining fluctuating capital accounts. On 1st January 2025, Ngozi's capital account balance was ₦450,000. During the year ended 31st December 2025, Ngozi introduced additional capital of ₦100,000. The partnership appropriation records show that Ngozi was credited with interest on capital of ₦45,000, a annual partner salary of ₦80,000, and a share of profit amounting to ₦120,000. During the same period, Ngozi made cash drawings of ₦60,000 and was charged ₦5,000 as interest on drawings. What is the balance of Ngozi's capital account as at 31st December 2025 in Naira (₦)?
Answer: 730000 ₦
Answer
The balance of Ngozi's capital account as at 31st December 2025 is ₦730,000.
Under the fluctuating capital method, all capital adjustments, partner entitlements, and withdrawals are recorded directly in the Capital Account. The closing balance is calculated by summing all credit entries (Opening Capital ₦450,000 + Additional Capital ₦100,000 + Interest on Capital ₦45,000 + Salary ₦80,000 + Share of Profit ₦120,000 = ₦795,000) and subtracting all debit entries (Drawings ₦60,000 + Interest on Drawings ₦5,000 = ₦65,000), giving a closing capital balance of ₦730,000.
Step-by-Step Solution
Key Concept
Calculation of closing capital balance under the fluctuating capital account method.
Estimated Time:1m 30s