Under partners capital accounts in fixed capital method , the specimen of the fixed capital account consists of drawings and additional capital , but while solving a question drawings and additional capital are taken into the current account , what is the significance of that specimen of the fixed account , in what cases does that occur ?
Under partners capital accounts in fixed capital method , the specimen of the fixed capital account consists of drawings and additional capital , but while solving a question drawings and additional capital are taken into the current account , what is the significance of that specimen of the fixed account , in what cases does that occur ?
Under Fixed Capital Method, we prepare two Accounts that are Partners’ Capital Account and the Partners’ Current Account.
In the Partners’ Capital Account the following items are recorded:
On the credit side of Partners’ Capital Account
(a) Opening balance of capital
(b) Additional Capital introduced during an accounting year
On the debit side of Partners’ Capital Account.
(a) Part of Capital withdrawn
(b) Closing balance of capital
In the Partners’ Current Account following items are recorded:
On the credit side of Partners’ Current Account.
(a) Opening balance of Current Account.
(b) Salaries to the partners
(c) Interest on capital
(d) Share of profit
(e) Commission and bonus to the partners
On the debit side of Partners’ Current Account
(a) Drawings made during the accounting period
(b) Interest on drawings
(c) Share of Loss
(d) Closing balance of Current Account
Here, it should be noted that if a partner make drawings out of his/her capital then it is shown in the Partners’ Capital Account on the debit side. Otherwise, the normal amount withdrawn from the business is shown in the Partners’ Current Account on the debit side. If nothing is mentioned regarding nature of drawings (i.e. whether it is made out of capital or from normal business), then it is treated as normal drawings made from the business and shown on the debit side of the Partners’ Current Account.
Under Fixed Capital Method, the additional capital introduced is always shown in the Partners’ Capital Account on the credit side and not shown in the Partners’ Current Account.
Under Fixed Capital Method, we prepare two Accounts that are Partners’ Capital Account and the Partners’ Current Account.
In the Partners’ Capital Account the following items are recorded:
On the credit side of Partners’ Capital Account
(a) Opening balance of capital
(b) Additional Capital introduced during an accounting year
On the debit side of Partners’ Capital Account.
(a) Part of Capital withdrawn
(b) Closing balance of capital
In the Partners’ Current Account following items are recorded:
On the credit side of Partners’ Current Account.
(a) Opening balance of Current Account.
(b) Salaries to the partners
(c) Interest on capital
(d) Share of profit
(e) Commission and bonus to the partners
On the debit side of Partners’ Current Account
(a) Drawings made during the accounting period
(b) Interest on drawings
(c) Share of Loss
(d) Closing balance of Current Account
Here, it should be noted that if a partner make drawings out of his/her capital then it is shown in the Partners’ Capital Account on the debit side. Otherwise, the normal amount withdrawn from the business is shown in the Partners’ Current Account on the debit side. If nothing is mentioned regarding nature of drawings (i.e. whether it is made out of capital or from normal business), then it is treated as normal drawings made from the business and shown on the debit side of the Partners’ Current Account.
Under Fixed Capital Method, the additional capital introduced is always shown in the Partners’ Capital Account on the credit side and not shown in the Partners’ Current Account.
