Fluctuating Capital Accounts: In this method only one account i.e., Capital Account of each and every partner is prepared and all the adjustment such as interest on capital, interest on drawings etc. are recorded in this account .Under this method ,Capital account may show a debit or credit balance and the balance of this account changes frequently from time to time. Partner's Capital Dr. A/cs Cr. X Y X Y ` ` ` ` Particulars Particulars To Balance b/d By Balance b/d (Opening Cr. (Opening Dr. Balance) Balance) To Cash/Bank A/c By Cash/ BankA/c (CapitalWithdrawn) (AdditionalCapital To Drawings Intoduced) By Interest on (out of profits) Capital To Interest on By Partner's Salary Drawings or To Profit and Loss A/c Commission (Share in losses) By Profit and Loss To Balance c/d AppropriationA/c (Closing credit Balance) (Share in Profits) By Balance c/d (Closing Dr. Balance) INTEREST ON CAPITAL in t Interestonpartners’capitalwillbeallowedonlywhenithasbeenspecificallymentioned he partnership deed. Interest on Capital can be treated as either: An Appropriation of or profit; A Charge against profits A. Interest on Capital: An Appropriation of Profits: Interest on Capital is NOT In Case of Losses ALLOWED In Case of Sufficient Profits Interest on Capital is ALLOWED IN FULL In case of Insufficient Interest on Capital is allowed only Profits to the extent of profits in the ratio of interest on capital of each partner
Fluctuating Capital Accounts: In this method only one account i.e., Capital Account of each and every partner is prepared and all the adjustment such as interest on capital, interest on drawings etc. are recorded in this account .Under this method ,Capital account may show a debit or credit balance and the balance of this account changes frequently from time to time. Dr. Partner's Capital A/cs Cr. Particulars X Y Particulars X Y ` ` ` ` To Balance b/d By Balance b/d (Opening Dr. Balance) (Opening Cr. Balance) To Cash/Bank A/c By Cash/ BankA/c (CapitalWithdrawn) (AdditionalCapital To Drawings Intoduced) (out of profits) By Interest on Capital To Interest on Drawings By Partner's Salary or To Profit and Loss A/c Commission (Share in losses) By Profit and Loss To Balance c/d AppropriationA/c (Closing credit Balance) (Share in Profits) By Balance c/d (Closing Dr. Balance) INTEREST ON CAPITAL Interestonpartners’capitalwillbeallowedonlywhenithasbeenspecificallymentioned in t he partnership deed. Interest on Capital can be treated as either: An Appropriation of profit; or A Charge against profits A. Interest on Capital: An Appropriation of Profits: In Case of Losses Interest on Capital is NOT ALLOWED In Case of Sufficient Profits Interest on Capital is ALLOWED IN FULL In case of Insufficient Profits Interest on Capital is allowed only to the extent of profits in the ratio of interest on capital of each partner
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