Question

Under fixed capital methods, profits will be credited to __________.

• A. capital account
• B. drawings
• C. current A/c
• D. profit and loss

Answer 1

The correct option is C current A/c

The account in a partnership firm can be kept in two ways- fixed capital and fluctuating capital.

Under the fixed nature of capital, the capital of each partner remains constant from the start of partnership till at the end of it. No adjustments like interest on capital, partner’s salary/commission, Drawings and profit or loss earned during the operation is made. To have record of all such adjustments each partner’s current account is opened, which is debited with Drawings, share of loss sustained during a period and credit is given for partner’s salary/commission, interest on capital and share of profit earned.