CUET Preparation Today
Which of the following is the feature of fluctuating capital? |
Under this method, two separate accounts are maintained for each partner, viz., 'capital account' and 'current account. Each partner has one account, i.e. capital account under this method The capital accounts always show a credit balance The capital account balance remain unchanged unless there is addition or withdrawal of capital. |
Each partner has one account, i.e. capital account under this method |
The correct answer is option 2- Each partner has one account, i.e. capital account under this method. Each partner has one account, i.e. capital account under this method is the feature of fluctuating capital. ALL OTHER ARE FEATURES OF FIXED CAPITAL METHOD. Fluctuating Capital Method: Under the fluctuating capital method, only one account, i.e. capital account is maintained for each partner. 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. This makes the balance in the capital account to fluctuate from time to time. That’s the reason why this method is called fluctuating capital method. In the absence of any instruction, the capital account should be prepared by this method. |
