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Fixed and Fluctuating Capital Accounts of the Partners

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

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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*.

 

Self-Learning Activities in Accountancy Class 12