If the partner's capital accounts are fixed, where will you record drawings made by a partner out of his capital during the year.

Debit side of Partner's Capital A/c

The correct answer is option 2- Debit side of Partner's Capital A/c.

Drawings made by the partner out of capital is permanent withdrawal of capital from the firm. So it is debited to partner's capital account.

In the fixed capital method, the partners' capital remains unchanged unless there are agreed-upon introductions or withdrawals of capital. All financial aspects such as profit or loss share, interest on capital, drawings, and interest on drawings are recorded separately in the Partner's Current Account. Partner's current account is debited with items like interest on drawings, share in loss and credited with interest on capital, salary, commission etc. The capital accounts of the partners always maintain a fixed credit balance, except when there are capital changes. Withdrawal of capital is debited to capital account and additional capital introduced by partner is credited to capital account. In contrast, the partners' current accounts may show either a debit or credit balance. Therefore, this method involves maintaining two accounts for each partner: the capital account and the current account. The partners' capital accounts are always presented on the liabilities side of the balance sheet. On the other hand, the balances of the partners' current accounts are shown on the liabilities side if they have a credit balance and on the assets side if they have a debit balance.