Fluctuating Capital Method Questions

Under this method, two separate accounts are maintained for each partner, viz., 'capital account' and 'current account.'

Each partner has one account, i.e. capital account under this method

The capital accounts always show a credit balance

The capital account balance remain unchanged unless there is addition or withdrawal of capital.

Under the fluctuating capital method, only one account, i.e. capital account is maintained for each partner

The partners' capital accounts will always show a credit balance, which shall remain the same (fixed) year after year unless there is any addition or withdrawal of capital.

All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc are recorded directly in the capital accounts of the partners.

In the absence of any instruction, the capital account should be prepared by this method.

Under this method, two separate accounts are maintained for each partner, viz., 'capital account' and 'current account'.

Each partner has one account, i.e. capital account under this method

Each partner has one account, i.e. current account under this method

The capital account balance remain unchanged unless there is addition or withdrawal of capital.