Under fluctuating capital method,
(A) Only one account, i.e., a capital account is maintained for each partner
(B) 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 current accounts of the partners.
(C) 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.
(D) This makes the balance in the capital account fluctuate from time to time.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (C) and (D) only
Under the fluctuating capital method each partner has only one account, his capital account, and every item that concerns him passes through it.
(A) Only one account, i.e., a capital account is maintained for each partner Correct. No separate current account is opened under this method.
(B) 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 current accounts of the partners. Incorrect. Current accounts belong to the fixed capital method; here the adjustments go straight to the capital accounts.
(C) 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. Correct. That is why one account is enough for each partner.
(D) This makes the balance in the capital account fluctuate from time to time. Correct. Every adjustment changes the capital balance, which gives the method its name.
NCERT (2026-27 edition): |