Which among the following is not a feature of the fixed capital method by which the capital accounts of partners can be maintained?
- AUnder this method, two separate accounts are maintained for each partner, viz., 'capital account' and 'current account'.
- BDrawings, salary, interest on capital, etc. are posted (transferred) in the current accounts and not in the capital accounts.
- CThe capital account shows debit balance.
- DThe capital account balance remains unchanged unless there is an addition to or withdrawal of capital.
Solution & Step-by-step Explanation
Under the Fixed Capital Method, the Partner's Capital Account always maintains a credit balance (except in rare situations where capital is entirely withdrawn, but it never reflects an active operating debit balance). Any recurring routine transactions like interest, drawings, or salary are kept inside the Current Account, which can display either a debit or a credit balance. Thus, statement C is false.