Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Partnership

Question:

Under which circumstances the fixed capital account of a partner can change?

Options:

Addition of capital

Withdrawal of capital

Drawings against capital

All of these

Correct Answer:

All of these

Explanation:

Option 1- Addition of capital
Option 2- Withdrawal of capital
Option 3- Drawings against capital
According to the fixed capital method, the partners' capital remains unchanged unless additional capital is added or a portion of it is withdrawn, as agreed upon by the partners. Transactions such as profit or loss distribution, capital interest, drawings, and interest on drawings are recorded in a separate account known as the Partner's Current Account. The capital accounts of the partners will always maintain a consistent positive balance, which remains unchanged from year to year unless there are capital injections or withdrawals. Drawings against capital or withdrawal from capital is the same thing.