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| The interest on Partner's Capital Accounts under fluctuating method is to be credited to: |
P and L a/c Interest A/c Partner's Capital A/c None of these |
| Partner's Capital A/c |
| Under the fluctuating capital method, only one account, i.e. capital account is maintained for each partner. All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc are recorded directly in the capital accounts of the partners. This makes the balance in the capital account to fluctuate from time to time. That’s the reason why this method is called fluctuating capital method. In the absence of any instruction, the capital account should be prepared by this method. |
