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the capital of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement between the partners.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?

All adjustments for drawings, salary, interest on capital, etc., are posted (transferred) in the capital accounts.

The correct answer is Option (2) → The partners' current account, on the other hand, may show a debit or a credit balance.

All adjustments for drawings, salary, interest on capital, etc., are posted (transferred) in the capital accounts. → Not true under fixed capital method. Such adjustments are made in a separate Current Account, not in the Capital Account.

"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the capitals of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement among the partners.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."