Accountancy Part AAccounting for Partnership

Current account of each partner is debited by the amount of:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Interest on drawings

Under the fixed capital method, the capital account records only the capital itself; all the regular adjustments (share of profit or loss, interest on capital, drawings, interest on drawings) go to the current account. Interest on drawings is a charge on the partner, so it is debited to his current account.

Option (1) Drawings out of capital — Incorrect. A permanent withdrawal of capital reduces the fixed capital itself and is debited to the capital account.

Option (3) Fresh capital introduced — Incorrect. Additional capital is credited to the capital account.

Option (4) Interest allowed on capital — Incorrect. Interest on capital is a gain to the partner and is credited to the current account.

NCERT (2026-27 edition):
Maintenance of Capital Accounts of Partners – “… (a) Fixed Capital Method: Under the fixed capital method, the capitals of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement among the partners. All items like share of profit or loss, interest on capital, drawings, interest on drawings, etc. are recorded in a separate accounts, called Partner’s Current Account.”