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 for the purpose of adjusting the items relating to 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 the additional capital and withdrawal of capital or permanent drawings.

Dr.                                                              Partner’s Capital account                              Cr.

 Particulars Particulars
To Bank (withdrawal of Capital)

To balance c/d ( closing balance)

Xxx

Xxx

——

By Bank or Balance b/d (opening capital)

By Bank (additional capital)

Xxx

Xxx

—–

Dr.                                                            Partner’s Current Account                             Cr.

Particulars Particulars
To Bank(drawings)

To Interest on Drawings

To balance c/d

Xxx

Xxx

Xxx

——

By balance b/d or Bank

By Interest on Capital

By salary/commission

By Profit and loss appr.account-Profit*

Xxx

Xxx

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)

Xxx

Xxx

Xxx

——

By balance b/d

By Bank (additional capital)

By Interest on Capital

By salary/commission

By Profit and loss appr.account-Profit*

Xxx

Xxx

Xxx

Xxx

Xxx

——

Note: It may be noted that the entry for recording of loss is always opposite to that of Profit*.

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