What is capital account and types of capital account

 Methods for maintaining capital account | Fixed and Fluctuating method

Partners’ capital accounts 

What is meant by Partners’ capital account      

This are the personal accounts of partner maintained in the columnar form to record the

transactions that are related to partners. Now there are two ways or methods for maintaining the capital account.

Two methods of maintaining capital account

1. Fixed capital method

2. Fluctuating capital method.

What is Fixed capital method

 Under this method partners’ capital account is fixed and all the adjustment’s that belongs to partner are to be transferred to current account. SO there are two accounts opened under this method partners’ capital as well as current account. While partners’ capital amount will remain constant every year.

a)The amount contributed by the partner at the beginning, part of capital withdrawn during the year and additional capital added by partner during the year all such transactions are to be recorded under partners’ capital account.

b)Other transactions like good/cash withdrawn by partner from business for personal use, interest on partners’ capital/ drawings, and distribution of net profit/ loss of the firm all such are to be recorded under partners current account.

What is Fluctuating capital method

Under this method as per the name balance of partners’ capital account keeps fluctuating. And all the adjustments that belongs to partners are to be transferred to partners’ capital account.

Transactions such as partners opening capital balance, additional capital brought by partner, withdrawal of good/cash , interest on partners’ capital/ drawings and net profit/ loss of partnership firm distributed.

What are main function & Several branches of Financial accounting

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R P Vani

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