Which of the following statement configurations is NOT true regarding Capital Accounts of partners?
- AUnder the fixed capital method, the capitals of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement among the partners.
- BUnder the fluctuating capital method, two accounts, i.e., capital account and current account are maintained for each partner.
- CUnder the fixed capital method, while the partners' capital accounts shall always appear on the liabilities side in the balance sheet, the partners' current account's balance shall be shown on the liabilities side if they have a credit balance and on the assets side if they have a debit balance.
- DUnder the fluctuating capital method, only one account, i.e., capital account is maintained for each partner.
Solution & Step-by-step Explanation
Under the fluctuating capital system, all transactions related to a partner (interest on capital, drawings, share of profit/loss, etc.) are recorded directly in a single account called the Partner's Capital Account. Maintaining two distinct accounts (Capital and Current) is a feature of the Fixed Capital Method. Therefore, Option B is a false statement.