Fixed and Fluctuating Capital Accounts of the Partners
Capital accounts of the partners can be prepared on Fixed or Fluctuating basis:
Fixed Capitals:
If partners decide to keep their capitals intact and same throughout the accounting year, they prepare Current Accounts in addition to Capital accounts.
Current Accounts include Interest on capital, interest on drawings, salary/commission to partner and share of profit or loss after such adjustments.
Capital accounts in such case, include only additional capital and withdrawal of capital/permanent drawings.
Dr. Partner’s Capital account Cr.
| Particulars | ₹ | Particulars | ₹ |
| To Bank (withdrawal of Capital)To balance c/d (closing balance) | XxxXxx
------ |
By Bank or Balance b/d (opening capital)By Bank (additional capital) | XxxXxx
----- |
Dr. Partner’s Current Account Cr.
| Particulars | ₹ | Particulars | ₹ |
| To Bank(drawings)To Interest on Drawings
To balance c/d |
XxxXxx
Xxx ------ |
By balance b/d or BankBy Interest on Capital
By salary/commission By P/L Appropriation A/c-Profit* |
XxxXxx
Xxx Xxx ------ |
Fluctuating Capitals:
If the partners decide to record all the items relating to capital in single account without caring for the balance, such capital accounts are fluctuating capital accounts.
Dr. Partner’s Capital account Cr.
| Particulars | ₹ | Particulars | ₹ |
| To Bank (Drawings)To Interest on Drawings
To balance c/d ( closing balance) |
XxxXxx
Xxx ------ |
By balance b/dBy Bank (additional capital)
By Interest on Capital By salary/commission By P/L Appropriation A/c - Profit* |
XxxXxx
Xxx Xxx Xxx ------ |
Note: It may be noted that the entry for recording of loss is always opposite to that of Profit*.
Partners' Capital Accounts
This video revises the preparation of Partners' Capital Accounts in both cases: Fixed and Fluctuating.
▶ Watch this video on YouTube