Question

Which of the following statement is not true for fixed capital account?

• A. The capital account balance remains unchanged unless there is addition to or withdrawal of capital
• B. The capital account accounts always show a credit balance
• C. Each partner has only one account ie capital account, under this method
• D. All adjustments for drawings, salary, interest on capital etc are made in current accounts

Hint:

In fixed capital method, recurring items go into the current account — capital account stays unchanged unless capital changes.

Answer 1

The Correct Option is C

Step 1: Understand the fixed capital method.
Under the fixed capital method, each partner maintains two separate accounts:
Capital Account (for initial and additional capital), and
Current Account (for all recurring adjustments like salary, drawings, interest, etc.).
Step 2: Identify the incorrect statement. Option (c) wrongly states that each partner has only one account under the fixed capital method. That’s actually true under the fluctuating capital method.