Saturday, June 22, 2013

2. PARTNER'S CAPITAL ACCOUNTS

12th BOOK KEEPING BY AJAYSANTHOSH MOURYA



2 Partners’ Capital Accounts:
In partnership firm, the transactions relating to partners are recorded in their respective capital accounts. Normally, each partners capital account is prepared separately. There are two methods by which the capital accounts of partners can be maintained. These are l Fluctuating Capital method and Fixed Capital method.
 


2.1 Fluctuating Capital method:
Under the fluctuating capital method, only one account, viz., the capital account for each partner, is maintained. It records all adjustments relating to drawings, interest on capital, interest on drawings, salary and share of profit or loss in the capital account itself. As a result, the balance in the capital accounts keep on fluctuating. In the absence of any instruction, the capital accounts of the partners should be prepared under this method.
 

2.2 Fixed Capital Method:
Under this method, two accounts are maintained for each partner viz., (i) Capital account and (ii) Current account. The capital account will continue to show the same balance from year to year unless some amount of capital is introduced or withdrawn. In the current account, the transactions relating to drawings, interest on capital, interest on drawings, salary, share of profit or loss etc., are recorded. Hence, the balance in the current accounts changes every year.


Format : (Fixed Capital Method) 

  

Lesson to be continue Distinction between Fixed Capital Method andFluctuating Capital Method

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