Accountancy Part AAccounting for Partnership

When partners' capital account is prepared under the fluctuating capi…

When partners' capital account is prepared under the fluctuating capital method, interest on drawings is shown under:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → The debit side of a Partners’ Capital Account

Under the fluctuating capital method each partner has only one account, his capital account, and every adjustment of the year goes through it. Interest on drawings is a charge on the partner, so it is debited to his capital account, along with his drawings.

Options (2) and (4) name a current account, which exists only under the fixed capital method; there the same item would go to the debit of the current account. Option (3) puts it on the credit side, where items due to the partner, such as interest on capital and salary, are recorded; interest on drawings is due from him.

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.”