Question

If the capital of partners is fixed, then the salary provided to the partner is posted in which of the following account?

• A. Capital Account
• B. Current Account
• C. Profit and Loss Account
• D. Executor's Account

Hint:

With fixed capital, salary, interest and drawings go to the Current Account, not the Capital Account.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
Partners can keep their capital accounts in two ways. Under the fixed capital method, the capital account balance stays the same every year. Under the fluctuating capital method, all adjustments go into the capital account itself.

Step 2: Key Rule:
Under fixed capital, all yearly items go to a separate Current Account. These items are salary, commission, interest on capital, interest on drawings, drawings and share of profit or loss.
The capital account changes only when capital is added or withdrawn.

Step 3: Check option (1).:
Salary in the capital account would change its balance every year. That breaks the fixed capital method. So (1) is wrong.

Step 4: Check option (2).:
Salary is credited to the partner's Current Account. So (2) is correct.

Step 5: Check option (3).:
The Profit and Loss Appropriation Account shows salary as a debit item, but it is not where the partner's claim is recorded. So (3) is wrong.

Step 6: Check option (4).:
An Executor's Account is opened for a deceased partner's dues. It has nothing to do with the salary here. So (4) is wrong.

Final Answer:
Salary of a partner is posted to the Current Account under fixed capital. \[ \boxed{\text{Current Account}} \]