Identify the true statement in respect of the Fixed Capital Method fo…

The correct answer is Option (1) → The Balance of Partners' Capital Account will be positive/credit.

Under the fixed capital method the capital account records only the capital introduced and any permanent withdrawal. Drawings, losses and interest on drawings go to the current account, so nothing can push the capital account below zero: it always shows a credit balance, which stays the same year after year unless capital is added or withdrawn.

Option (2) The Balance of Partners' Capital Account may be negative / Debit or may be nil/zero. — Incorrect. A debit or nil capital balance would need drawings or losses posted to the capital account, which this method does not do.

Option (3) The Balance of Partners' Capital Account may be negative / Debit or may be positive/Credit. — Incorrect. “Debit or credit” describes the current account under this method, not the capital account.

Option (4) The Balance of Partners' Capital Account will never be positive/Credit. — Incorrect. It states the opposite of the rule: the capital account is always in credit.