Question

In the books of a partnership firm maintaining fluctuating capital accounts, which of the following appropriations or adjustments would result in a credit to the Partners' Current Accounts?

• A. Interest allowed on partners' capitals
• B. Remuneration, salary or commission payable to partners
• C. Share of divisible profits transferred to partners
• D. All of the above items

Hint:

Fixed capital method → Current Account used for all adjustments. Fluctuating capital method → everything goes to Capital Account.

Answer 1

The Correct Option is D

Concept: In partnership firms maintaining fluctuating capital accounts, all adjustments such as interest on capital, salary, commission, and share of profits are directly recorded in the Capital Account. However, when fixed capital method is followed, these adjustments are credited to the Partners' Current Account. Therefore, all items that increase a partner’s claim are credited to Current Account.

Step 1: Understand fluctuating vs fixed capital method.
In fluctuating capital method: \[ Capital Account = All adjustments included \] But in fixed capital method: \[ Current Account = Adjustments recorded separately \]

Step 2: Analyze each option.

• Interest on capital → increases partner's claim → credit
• Salary/commission → income for partner → credit
• Share of profit → increases capital → credit

Step 3: Final conclusion.
All the given items result in credit to partners' Current Accounts. Final Answer: All of the above