Which of the following is the feature of Fixed Capital Method in Partnership Accounts:-

In Partnership Accounts, there are two methods of maintaining capital accounts - Fixed Capital Method and Fluctuating Capital Method.

Under the Fixed Capital Method:

Each partner maintains two accounts:

• Capital Account
• Current Account

The Capital Account records only the amount of capital introduced or permanently withdrawn by the partner. All other transactions like interest on capital, partner's salary, drawings, share of profit/loss are recorded in the Current Account.

Analyzing the options:

Option 1 states each partner has one account. This is incorrect as Fixed Capital Method requires two accounts per partner.

Option 2 states the capital accounts always show a credit balance. This is the correct feature. Since the Capital Account shows only the fixed capital contribution and is not affected by routine transactions like profits, drawings, or interest, it remains constant and always shows a credit balance (unless there's a permanent withdrawal of capital).

Option 3 states the balance fluctuates from year to year. This is incorrect as the defining characteristic of this method is that capital remains fixed. The fluctuations occur in the Current Account, not the Capital Account.

Option 4 states this method should be used in absence of instructions. This is incorrect. When no method is specified, the Fluctuating Capital Method (with one account) is typically followed.

The Capital Account under Fixed Capital Method remains unchanged year after year, maintaining a stable credit balance that represents the permanent capital invested by partners.