Choose the correct statement from the following regarding the Partner…

Choose the correct statement from the following regarding the Partner's Capital.

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Under the Fixed Capital method, the capital accounts always show a credit balance.

Under the fixed capital method each partner has two accounts. The capital account holds only the capital he brought in, so it stays the same year after year and always shows a credit balance. Profit, interest, salary, drawings and the like go to a separate current account, and it is the current account that may turn debit.

Under the fluctuating capital method there is only one account, the capital account, and every adjustment is made in it.

Why the other options are incorrect

Option (1) Under the Fixed Capital method, each partner has only one account regarding to capitals, drawings, salary, and interest etc. — Incorrect. One account is the fluctuating method. The fixed method keeps two accounts: capital and current.
Option (2) Under the Fluctuating Capital method, each partner has two accounts regarding capital, drawings, salary and interest etc. — Incorrect. The fluctuating method keeps only one account, the capital account, whose balance keeps changing.
Option (4) Under the Fixed Capital method, the capital account may sometimes show a debit balance. — Incorrect. Losses and drawings never touch the fixed capital account, so it cannot go debit. It is the current account that may show a debit balance.

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the capitals of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement among the partners.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. The partners’ current account on the other hand, may show a debit or a credit balance.”

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.”