Question

A firm Maintains a Capital Account and a Current Account for each partner. What is the term used when this method of maintaining Capital Accounts is followed?

Answer 1

The term used when this method of maintaining capital accounts is followed is the 'Fixed Capital account' method. In this method two separate accounts are prepared. The Partner's Capital account shows the same balance from year to year unless additional amount is introduced or withdrawn. The Partner's Current account shows all items relating to the partners; like interest on capital and drawings, share of profit etc.