Under the fixed capital method, the capital of the partners shall rem…

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the capital of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement between the partners.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 2

The correct answer is Option (2) → All adjustments for drawings, salary, interest on capital, etc., are posted (transferred) in the capital accounts.

Under the fixed capital method each partner has two accounts. The capital account carries only the capital brought in or permanently withdrawn, so it stays fixed. Every other item — share of profit, salary, interest on capital, drawings, interest on drawings — goes to a separate current account. Posting all these adjustments to the capital account is what the fluctuating capital method does, so option (2) is not a feature of the fixed method.

Option (1) The partners' capital accounts will always show a credit balance. — A feature of the fixed capital method. With only capital in it, the account can never turn debit.

Option (3) Under this method, two accounts are maintained for each partner. — A feature of the fixed capital method. A capital account and a current account.

Option (4) The partners' current account, on the other hand, may show a debit or a credit balance. — A feature of the fixed capital method. Heavy drawings can make it debit; profit and interest can make it credit.

NCERT (2026-27 edition):
Maintenance of Capital Accounts of Partners

Extract from the NCERT textbook

NCERT (2026-27 edition):
Maintenance of Capital Accounts of Partners – “… (b) 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.”