12th BOOK KEEPING BY AJAYSANTHOSH MOURYA
2 Partners’ Capital Accounts:
2.1 Fluctuating Capital method:
2.2 Fixed Capital
Method:
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.
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withdrawn.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
No comments:
Post a Comment