Match List I with List II.

Choose the correct answer from the options given below.

A-IV, B-I, C-II, D-III

The correct answer is option 1- A-IV, B-I, C-II, D-III.

(A) Bank (fresh capital introduced)- (IV) Credit side of Partner's Capital Account.
When a partner introduces capital into the partnership, it increases the partner's capital. This transaction is recorded on the credit side of the capital account.

(B) Interest on drawings- (I) Debit side of Partner's Current Account.
When a partner withdraws funds for personal use, it's termed as drawings. Firm charge interest on such drawings. Such interest on drawings is an expense for the partner and gain for the firm. So, this transaction is recorded on the debit side of the partner's current account.

(C) Bank (permanent withdrawal of capital)- (II) Debit side of Partner's Capital Account.
When a partner withdraws capital from the partnership, it decreases the partner's capital. This transaction is recorded on the debit side of the partner's capital account.

(D) Commission- (III) Credit side of Partner's Current Account.
When a partner is entitled to a commission from the partnership, it's recorded as a liability of the partnership. This transaction is recorded on the credit side of the partner's current account, indicating an increase in the partner's share of profits (as the salary reduces the profits available for distribution).

Fixed Capital Method: Under the fixed capital 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the capitals of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement among the partners. All items like share of profit or loss, interest on capital, drawings, interest on drawings, etc. are recorded in a separate accounts, called Partner’s Current Account. The partners’ capital accounts will always show a credit balance, which shall remain the same (fixed) year after year unless there is any addition or withdrawal of capital. The partners’ current account on the other hand, may show a debit or a credit balance. Thus under this method, two accounts are maintained for each partner viz., capital account and current account, While the partners’ capital accounts shall always appear on the liabilities side in the balance sheet, the partners’ current account’s balance shall be shown on the liabilities side, if they have credit balance and on the assets side, if they have debit balance.