Which method of maintaining partners' capital accounts involves recording transactions other than capital addition/withdrawal in a separate account?

Fixed capital method

The correct answer is option 1- Fixed capital method.

Under the fixed capital method, the partners' capital remains fixed unless there are additional capital introductions or capital withdrawals as per the agreement among the partners. Transactions such as share of profit or loss, interest on capital, drawings, interest on drawings, etc., are recorded in a separate account called the Partner's Current Account. The partners' capital accounts will always show a credit balance that remains the same (fixed) year after year unless there are changes in capital. Current can have a debit or credit balance.