Partners Capital Account
Types of capital accounts of the partners are;
- Fixed Account, and
- Fixed Fluctuation.
Fixed Capital
If the partner agrees to keep the Capital Account at original figures from year to year in the book, then under this method, two accounts are opened for each partner;
- Capital Account, and
- Current Account.
The capital account records the amount of capital contributed by a partner.
The Current account is used to record particulars of all other transactions between the firm and the partner,
- interest on capital,
- share of profit or loss,
- partner’s salaries,
- interest on the loan, etc.
Fluctuation Capital
If the partner’s no agreement to keep the Capital Account at original figures from year to year in the book, then under this method, two accounts are opened for each partner;
- Capital Account, and
- Drawing Account.
The Capital account is used to record all of the transactions between the firm and the partner and the Drawing account is opened particularly when the drawing by a partner is frequent and regular.