Partnership

Accounting

Easy

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the capital of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement between the partners.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 (transferred) in the capital accounts.

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

The partners' current account, on the other hand, may show a debit or a credit balance.

✅ Correct Option: 2

Under the Fixed Capital Method, the capital account remains unchanged except when capital is introduced or withdrawn permanently. To understand which option is NOT a feature, let's examine what actually happens under this method.

In the Fixed Capital Method:

Two separate accounts are maintained for each partner: Capital Account and Current Account
The Capital Account records only permanent capital transactions (initial capital, additional capital introduced, or capital withdrawn permanently)
The Current Account records all adjustments like interest on capital, salary, commission, drawings, and share of profit/loss

Analyzing each option:

Option 1 is a feature → Capital accounts always show credit balance since they represent the fixed capital contributed by partners.

Option 2 states adjustments are posted in capital accounts → This is INCORRECT and NOT a feature of the fixed capital method. Under this method, all adjustments (drawings, salary, interest on capital, commission, profit/loss share) are transferred to the Current Account, not the Capital Account. This is the fundamental characteristic that keeps the capital "fixed."

Option 3 is a feature → Two accounts (Capital and Current) are indeed maintained for each partner.

Option 4 is a feature → The current account can show either debit balance (when drawings and debits exceed credits) or credit balance (when credits like profit share exceed drawings).

The correct answer is Option 2 because in the Fixed Capital Method, adjustments are posted to the Current Account, not the Capital Account. If adjustments were posted to capital accounts, it would be the Fluctuating Capital Method.

2024

Match List-I with List-II

2026: 13 May Shift 2

Nimrat, Simrat and Harjeet are partners sharing profits and losses in the ratio of 5 : 3 : 2. The partnership deed provides for charging interest on drawings @ 10% p.a. The drawings of Nimrat, Simrat and Harjeet during the year ending March 31, 2025 amounted to Rs. 60,000, Rs. 45,000 and Rs. 30,000 respectively, which were made on 1st April, 2024. After the final accounts have been prepared, it was discovered that interest on drawings has not been taken into consideration. If the necessary adjustment is made for rectification of this error, then:

2025: 26 May Shift 2

A correct journal entry for Transfer of the balance of Profit and Loss Account (a credit balance) to Profit and Loss Appropriation Account is-

2025: 30 May Shift 2

Mohan and Shyam are partners in a firm. Which statement among the below can be claimed valid if the Partnership Agreement is silent regarding the same.

2023: 29 May Shift 2

Complete the sequence where interest on capital has to be provided as per partnership deed, but available profits are not sufficient to provide full amount of Interest on capital.

A. If it is appropriation, calculate interest on capital for all partners at given rate

B. Divide the available amount in the capital ratio among the partners

C. Calculate ratio between capital of partners

D. Consider the partnership deed and decide whether interest on capital is a charge or an appropriation

E. Consider the available profit

Choose the correct answer from the options given below:

2026: 21 May Shift 2

Amita and Kabuliwala are partners, sharing profits in the ratio of 2:2 with capitals of Rs.1,50,000 and Rs.30,000 respectively. Interest on capital is agreed @ 6% p.a. A commission of Rs. 5000 is to be allowed to manager. During the financial year 2024-25, on Oct. 01, 2024, Amita gave a loan of Rs. 1,00,000 to the firm without any agreement. During the year 2024-2025, a profit of Rs. 2,22,250 was earned. Calculate the profit that would be transferred to Profit & Loss Appropriation A/C.

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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CUET Accountancy Past Year Questions (Topic-Wise)

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?