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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the capital of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement between the partners.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? |
The partners' capital accounts will always show a credit balance. All adjustments for drawings, salary, interest on capital, etc., are posted (transferred) in the capital accounts. Under this method, two accounts are maintained for each partner. 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. |
The correct answer is Option (2) → The partners' current account, on the other hand, may show a debit or a credit balance. |
