Under fluctuating capital method,
(A) Only one account, i.e., a capital account is maintained for each partner
(B) All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc. are recorded directly in the current accounts of the partners.
(C) All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc. are recorded directly in the capital accounts of the partners.
(D) This makes the balance in the capital account fluctuate from time to time.
Choose the correct answer from the options given below:
Under fluctuating capital method,
(A) Only one account, i.e., a capital account is maintained for each partner
(B) All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc. are recorded directly in the current accounts of the partners.
(C) All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc. are recorded directly in the capital accounts of the partners.
(D) This makes the balance in the capital account fluctuate from time to time.
Choose the correct answer from the options given below:
Solution
Under the fluctuating capital method a single capital account is kept for each partner and every adjustment, including profit share, interest on capital, drawings, interest on drawings and remuneration, is posted straight into it, so the balance keeps changing. Recording adjustments in a separate current account belongs to the fixed capital method, making (B) incorrect.
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