Under the fixed capital method, the capital of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement between the partners. Which among the following is NOT the feature of the fixed capital method?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Under this method, two capital accounts are maintained for each partner.
Under the fixed capital method each partner has two accounts, but they are one capital account and one current account, not two capital accounts. The capital account holds the fixed capital; drawings, salary, interest and the share of profit go to the current account.
Option (1) The partners’ capital accounts will always show a credit balance. — A feature of the method. The capital stays fixed and is a liability of the firm to the partner.
Option (2) All adjustments for drawings, salary, interest on capital, etc., are posted in the current accounts. — A feature of the method. That is why the capital account does not change.
Option (4) The partners’ current account may show a debit or a credit balance. — A feature of the method. If drawings exceed the partner’s earnings from the firm, the current account turns debit.
NCERT (2026-27 edition):
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