(5) PARTNERSHIP —
FUNDAMENTALS
Capital Accounts of Partners:
In
case of partnership there is a separate Capital Account for each partner. The capital
contributed by each partner will be credited to his capital account. The capital accounts of partners may be maintained in any
one of the following two methods:
(1) Fixed Capital Accounts /ਸਥਿਰ ਪੂੰਜੀ ਖਾਤੇ
Capital
of the partners are not allowed to change during the life time of business
except in extraordinary circumstances. When fixed capital method is adopted,
all entries related to drawings, interest on capital, interest on drawing,
salary to partner, share of profit or loss etc. are made in a newly opened
account for each partner. This account is called current account or drawings
account.
(2) Fluctuating Capital Accounts/ ਅਸਥਿਰ ਪੂੰਜੀ ਖਾਤੇ
All
the entries related to drawings, interest on capital, interest on drawing,
salary to partner, share of profit or loss etc. are recorded in the capital
accounts itself.
In the absence of any
instruction, the capital account should be prepared by this method.
Difference between Fixed Capital Accounts and Fluctuating
Capital Accounts: ਸਥਿਰ ਪੂੰਜੀ ਖਾਤੇ ਅਤੇ ਅਸਥਿਰ ਪੂੰਜੀ ਖਾਤੇ
|
Sr. No. |
Fixed Capital Accounts |
Fluctuating Capital Accounts |
|
1. |
Balance in Capital Account usually remain
unchanged during the life time of business. |
Balance in Capital Account go on changing
from time to time. |
|
2. |
Two accounts namely Capital Account and a Current
Account are |
Only one account namely Capital Account is
prepared. |
|
3. |
Fixed Capital Account can never show a
negative Balance |
Fluctuating Capital Account can show a
negative balance. |
|
4. |
Drawings, Interest on Drawing, Interest on
Capital, Salary etc. are not shown in Capital Account, but are entered in
Current Account. |
All transactions relating to partners are made
directly in Capital Accounts itself. |
