Which statement is not true about Capital Accounts of Partner?

The correct answer is Option (2) → Under the fluctuating capital method, two account, i.e. capital account and current account is maintained for each partner.

The two methods differ in the number of accounts kept for each partner. Under the fixed capital method there are two (capital and current); under the fluctuating capital method there is only one, the capital account, in which every adjustment is recorded. Option (2) gives the fluctuating method two accounts, so it is not true.

Option (1) 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the capitals of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement among the partners. — A true statement. Only fresh capital or a permanent withdrawal changes the fixed capital.

Option (3) Under the fixed capital method, While the partners’ capital accounts shall always appear on the liabilities side in the balance sheet, the partners’ current account’s balance shall be shown on the liabilities side, if they have credit balance and on the assets side, if they have debit balance. — A true statement. A fixed capital always has a credit balance, while a current account may go either way.

Option (4) Under the fluctuating capital method, only one account, i.e. capital account is maintained for each partner. — A true statement. All items go to the capital account, which is why its balance fluctuates.