Partnership

Accounting

Medium

common

Under the fixed capital method, the capital of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement between the partners. Which among the following is NOT the feature of the fixed capital method?

The partners' capital accounts will always show a credit balance.

All adjustments for drawings, salary, interest on capital, etc., are posted in the current accounts.

Under this method, two capital accounts are maintained for each partner.

The partners' current account may show a debit or a credit balance.

✅ Correct Option: 3

Under the Fixed Capital Method, each partner has two separate accounts:

Capital Account - records permanent changes only (additional capital introduced or capital withdrawn permanently)
Current Account - records all temporary adjustments (drawings, interest on capital, salary, share of profit/loss, etc.)

Let's examine each option:

Option 1: Partners' capital accounts always show credit balance

This is a correct feature. Since capital accounts only record permanent capital transactions and no adjustments are made for drawings or distributions, they maintain a credit balance throughout.

Option 2: All adjustments are posted in current accounts

This is a correct feature. Interest on capital, salary, drawings, commission, interest on drawings, and share of profit/loss - all are recorded in the current account, not the capital account.

Option 3: Two capital accounts are maintained for each partner

This statement is incorrect. Under the fixed capital method, we maintain:

ONE Capital Account (not two)
ONE Current Account

The method requires two different types of accounts, not two capital accounts. This is a key distinction that makes this option the answer.

Option 4: Current account may show debit or credit balance

This is a correct feature. The current account balance depends on the net effect of all adjustments. If drawings exceed the partner's share of profits and other credits, it shows a debit balance. If credits exceed drawings, it shows a credit balance.

The answer is Option 3 because it incorrectly describes the nature of accounts maintained under the fixed capital method.

2026: 29 May Shift 1

Arrange the following steps in sequence, related to calculation of goodwill by capitalisation of super profits method.

(A) Calculate super profits.

(B) Multiply the super profits by the required rate of return multiplier

(C) Calculate capital of the firm, which is equal to total assets (excluding goodwill and fictitious assets) minus outside liabilities.

(D) Calculate normal profits on capital employed and average profits for past years,

Choose the correct answer from the options given below:

2023: 11 June Shift 3

__________ is/are not true with regard to Limited liability partnership.

(A) Separate Legal entity

(B) Unlimited liability for one partner

(D) Perpetual Succession

(E) Unlimited liability of partners

Choose the correct answer from the options given below :

2025: 4 June Shift 2

Which combination of statements is true about the fixed and fluctuating capital:

(A). Under the Fixed capital method, two separate accounts are maintained for each partner, viz., 'capital account' and 'current account'.

(B). Under the Fluctuating capital method, the balance of the capital account fluctuates from year to year.

(C). Under the Fixed capital method, drawings, salary, interest on capital etc. are posted (transferred) in the current accounts and not in the capital accounts.

(D). Under the Fixed capital method, the capital accounts always show a debit balance.

Choose the correct answer from the options given below:

2026: 19 May Shift 1

Which of the following statements are true ?

(A) Under fixed capital method, capital and current accounts are prepared.

(B) If a partner withdrew in the beginning of each month, average period is 6.5 months taken for interest calculation.

(D) In the absence of partnership deed, profits are distributed in the capital ratio.

Choose the correct answer from the options given below:

2025: 24 May Shift 1

Opening capital balances of partners will be calculated by using which of the following formula :-

2023: 29 May Shift 2

Match List I with List II

LIST I	LIST II
A. Interest on capital	I. Admission of partner
B. Gaining Ratio	II. Profit/Loss in the old profit sharing ratio
C. Sacrificing ratio	III. Continuing partners
D. Revaluation of Assets and Liabilities	IV. when partnership deed specifically provide for it

Choose the correct answer from the options given below:

Under the fixed capital method, the capital of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement between the partners. Which among the following is NOT the feature of the fixed capital method?

Solution

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