Accounting for Partnership : Important Questions for CBSE Class 12 Accountancy Maintenance of Capital Accounts of Partner:Fixed and Fluctuating capital
1. Fixed Capital Under this method, the capitals of the partners shall remain fixed, unless additional capital is introduced or a part of the capital is withdrawn, as per the agreement among the partners.
Two accounts are maintained under this method:
Capital accounts and current accounts.
Transactions related to introduction and withdrawal of capital are recorded in capital account, rest are recorded in current account.
Capital account will always have credit balance and current account may have credit or debit balance.
2. Fluctuating Capital Under this method, only one account, i.e. capital account of each partner is maintained.
All transactions are recorded in capital accounts. Generally, capital account has credit balance but in exceptional cases it may have debit balance due to heavy losses or withdrawals.
Previous Years Examination Questions
1 Mark Questions
1. Name the accounts which are maintained for the partners when capitals of the partners are fixed. (Compartment 2014)
Ans. When capitals of the partners are fixed, following accounts are required to be maintained:
(i) Partner’s fixed capital accounts (ii) Partner’s current capital accounts.
2. Distinguish between fixed and fluctuating capital accounts.
(Compartment 2014) (Delhi; All India 2011)
Ans. Difference between fixed and fluctuating capital accounts
3. When the partners’ capitals are fixed, where the drawings made by a partner will be recorded? (Delhi; All India 2013)
Ans. When the partners’ capitals are fixed, the drawings made by a partner will be recorded in partners’ current account (debit side).
4. State the conditions under which the capital balances may change under the system of fixed capital account.(All India 2009,2008; Delhi 2009 c)
Ans. The conditions under which the capital balances may change under the system of a fixed capital ‘ accounts are:
(i) When additional capital is introduced.
(ii) When capital is withdrawn.
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