Which statement is not true about Capital Accounts of Partner-

The statement in Option 2 is not true.

Under the Fluctuating Capital Method, only ONE account (Capital Account) is maintained for each partner. All transactions such as drawings, interest on capital, salary, commission, and share of profit or loss are directly recorded in the Capital Account itself. This causes the capital balance to fluctuate continuously.

It is the Fixed Capital Method where TWO accounts are maintained for each partner:

• Capital Account - Records only permanent changes (initial capital, additional capital introduced, permanent withdrawal)
• Current Account - Records all other transactions (drawings, interest on capital, salary, profit share, etc.)

The confusion often arises because students mix up the features of both methods. The key difference is:

Fixed Capital Method → 2 Accounts (Capital + Current)

Fluctuating Capital Method → 1 Account (Capital only)

All other statements are correct:

• Option 1 correctly describes that fixed capital remains unchanged except for permanent capital changes
• Option 3 correctly explains that under fixed capital method, Capital Account always appears on liabilities side, while Current Account can appear on either side based on debit or credit balance
• Option 4 correctly states that fluctuating capital method maintains only one account