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Loan Settlement with Retiring Partner

Interest on c...

Question

Interest on capital is credited to Partner's Current Account. Name the method of maintaining Capital Account.

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Solution

If interest is credited to the Partner's Current account then the method followed is 'Fixed Capital' method. Under this method all transactions relating to the partners are entered in a separate account known as the Partner's Current account. The partner's capitals remain fixed throughout the course of the firm.

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