Question

What is Fluctuating Capital Method?

Answer 1

The capital of the partners does not remain fixed but changes with each and every transaction in fluctuating capital method. In this method, only one account i.e. Capital Account is maintained for each partner.

1. There are two ways of maintaining a capital account in a partnership form of business organization which are a) Fixed Capital Account and b) Fluctuating Capital Account.
2. There will be an increase or decrease in the capital of the partners which is associated with the activities such as interest received and drawings by partners.