Question

Distinguish between Fluctuating and Fixed Capital methods.

Answer 1

Fixed capital method	Fluctuating capital method
1. under this method, two accounts namely capital account and current account are prepared for each partner	1. Each partners has one account i.e. capital account
2. All adjustments are made in the current account and not in the capital accounts.	2. All adjustments for drawings, salary, interest on capital etc. are made in the capital accounts
3. The capital account balance remain unchanged unless there is addition or withdrawal of capital.	3. The balance of the capital account fluctuates from year to year.
4. The capital account always shows a credit balance.	4. The capital account may sometimes show a debit balance.