Match List-I with List-II. Match the accounts with their purpose LIST…

Match List-I with List-II.

Match the accounts with their purpose

LIST I	LIST II
(A) Profit and loss adjustment account	(I) Changes in amount of capital
(B) Profit and loss appropriation account	(II) Generally no change in amount of capital
(C) Fixed capital A/c	(III) Errors and omissions found after preparation of final A/c
(D) Fluctuating capital method	(IV) Extension of Profit & loss A/c

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (A)-(III), (B)-(IV), (C)-(II), (D)-(I)

Each of these accounts or methods has one job in partnership accounts: correcting the past, dividing the current profit, or deciding where the partners’ items are recorded.

(A) Profit and loss adjustment account — this matches (III) Errors and omissions found after preparation of final A/c. It is used to correct an omission found after the profits have been distributed, without reopening the old accounts.

(B) Profit and loss appropriation account — this matches (IV) Extension of Profit & loss A/c. It starts with the net profit of the Profit and Loss Account and shows how that profit is divided among the partners.

(C) Fixed capital A/c — this matches (II) Generally no change in amount of capital. Only fresh capital or a permanent withdrawal changes it, so the balance stays the same year after year.

(D) Fluctuating capital method — this matches (I) Changes in amount of capital. Profit, interest, salary and drawings all go into the one capital account, so its balance keeps changing.

NCERT (2026-27 edition):
Past Adjustments – “Sometimes a few omissions or errors in the recording of transactions or the preparation of summary statements are found after the final accounts have been prepared and the profits distributed among the partners. The omission may be in respect of interest on capitals, interest on drawings, interest on partners’ loan, partner’s salary, partner’s commission or outstanding expenses. There may also be some changes in the provisions of partnership deed or system of accounting having impact with retrospective effect. All these acts of omission and commission need adjustments for correction of their impact. Instead of altering old accounts, necessary adjustments can be made either; (a) through ‘Profit and Loss Adjustment Account’, or (b) directly in the capital accounts of the concerned partners.”

NCERT (2026-27 edition):
Profit and Loss Appropriation Account – “Profit and Loss Appropriation Account is merely an extension of the Profit and Loss Account of the firm.”

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. The partners’ capital accounts will always show a credit balance, which shall remain the same (fixed) year after year unless there is any addition or withdrawal of capital.”

NCERT (2026-27 edition):
Maintenance of Capital Accounts of Partners – “… (b) Fluctuating Capital Method: 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.”