Which of the following statements relates to Fixed Capital Method?
(A) The capitals of the partners shall remain fixed unless additional capital is introduced or capital is withdrawn.
(B) All items like share of profit or loss, interest on capital, drawings, interest on drawings, etc. are recorded in Partner's Current Account.
(C) The partners' capital accounts will always show a debit balance.
(D) The partners' current account may show a debit or a credit balance.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (B) and (D) only
The fixed capital method keeps the capital itself apart from the year-to-year dealings with each partner.
(A) The capitals of the partners shall remain fixed unless additional capital is introduced or capital is withdrawn. Correct. That is what gives the method its name.
(B) All items like share of profit or loss, interest on capital, drawings, interest on drawings, etc. are recorded in Partner's Current Account. Correct. These go to the separate current account.
(C) The partners' capital accounts will always show a debit balance. Incorrect. They always show a credit balance; a capital account holds what the firm owes the partner.
(D) The partners' current account may show a debit or a credit balance. Correct. Drawings and losses can exceed the credits in a year.
NCERT (2026-27 edition): |