The correct answer is option 4- (A)-(III), (B)-(IV), (C)-(II), (D)-(I).
| LIST I |
LIST II |
| (A) Profit and loss adjustment account |
(III) Errors and omissions found after preparation of final A/c |
| (B) Profit and loss appropriation account |
(IV) Extension of Profit & loss A/c |
| (C) Fixed capital A/c |
(II) Generally no change in amount of capital |
| (D) Fluctuating capital method |
(I) Changes in amount of capital |
A) Profit and Loss adjustment A/c- (III) Errors and omissions found after preparation of final A/c.
Profit & Loss adjustment A/c is prepared to rectify the errors after the preparation of the final accounts of the partnership firm. If, after the final accounts have been prepared, some omission or commissions are noticed say in respect of the interest on capital, interest on drawings, partner’s salary, commission, etc. necessary adjustments can be made in the partner’s capital accounts through the Profit and Loss Adjustment Account, to rectify the same.
(B) Profit and loss appropriation A/c- (IV) Extension of Profit & loss A/c.
Profit and Loss Appropriation Account is merely an extension of the Profit and Loss Account of the firm. It shows how the profits are appropriated or distributed among the partners. All adjustments in respect of partner’s salary, partner’s commission, interest on capital, interest on drawings, etc. are made through this account. It starts with the net profit/net loss as per Profit and Loss Account.
(C) Fixed capital A/c- (II) Generally no change in amount of capital.
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the capitals of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement among the partners.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. The partners’ current account on the other hand, may show a debit or a credit balance
(D) Fluctuating capital method- (I) Changes in amount of capital.
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. |
