Read the following passage and answer the questions given below.

Ram and Shyam are partners sharing profits in the ratio of 3:2. Their capitals as on 31st March 2022 were ₹5,00,000 and ₹3,00,000 respectively. There is no partnership deed but both partners agreed for the interest on capital @ 5% p.a. and salary to Shyam of ₹25,000 annually. Shyam salary is debited to profit and loss account. On preparing accounts it was found that Interest on capital is omitted and manager's commission was not given which is 5% of the net profit before charging such commission. Profits after Shyam salary was ₹2,49,300.

Which account of partners is maintained by the firm for the capital accounts?

Capital account

The correct answer is option 1- capital account.

When no information is given then capital accounts are maintained by fluctuating method and under this method, only capital account is maintained.

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.