In the case of the fixed capital method, which two accounts are maintained for each partner?
- ACapital account and Balance sheet
- BCurrent account and Balance sheet
- CCapital account and Current account
- DRevaluation and Capital account
Solution & Step-by-step Explanation
Under the Fixed Capital Method, the capital balances of the partners remain unchanged unless additional capital is introduced or structural capital is permanently withdrawn. To achieve this, two separate accounts are maintained:Partner's Capital Account (records only core capital contributions and permanent withdrawals).Partner's Current Account (records day-to-day adjustments like drawings, interest on capital, salaries, and profit shares).