Question

What is fluctuating capital method?

Answer 1

Dear Student,
Under fluctuating capital account method there is only one account prepared that is "Capital Account" which is maintained for each partner. All the transactions of a partner namely, capital introduced, salary, commission, drawings, interest charged on drawings etc. are recorded in this particular capital account only. Due to this, the capital accounts of the partner fluctuates with every transaction. So, the fluctuating capital accounts is basically meant for maintaining capital accounts. If the capital account has credit balance then it should be shown on the liabilities side of the balance sheet whereas if it has a debit balance then these balances are shown on the debit side of balance sheet.
Capital account under fluctuating method is as follows;
Dr. Partners' Capital Accounts Cr.

Particular	X	Y	Z	Particulars	X	Y	Z
To Balance b/d ( if debit opening balance)				By balance b/d( if credit opening balance)
To drawing a/c				By Bank/Cah A/c ( Additional capital)
To interest on drawings a/c				By interest on capital a/c
To profit and loss a/c (loss)				By partners' salary a/c
To balance c/d**				By Profit & loss appropriation a/c (profit)
	-----------	---------	-------------		---------	---------	--------

** This balance can be on opposite side also.
Regards.
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