Difference between Fixed and Fluctuating Capital Accounts

Fixed and fluctuating capital accounts are the terms which are often used in the context of partnership. Partners can maintain the capital accounts in two ways one is fixed capital account and other is fluctuating capital accounts, let’s look at the difference between both of them –

Fixed Capital Account – Under this system, the capital which is introduced by partners will remain fixed throughout the life of the partnership. Hence under this method two type of accounts are made one is capital account and other is current account. Therefore all entries relating to drawings, interest on capital, profit and loss share of partner are made in a separate account for each partner, it is called current account of partners. However when partner brings additional capital or withdraws capital permanently, then capital account is credited or debited respectively.

Fluctuating Capital Account – Under this method capital account of partners will not remain fixed rather they will keep fluctuating from time to time. In this method all the entries related to drawings, interest on capital and share of profit and loss of partner are recorded in capital account, hence in this method there is no need for current account.

Fluctuating capital account method is usually preferred by partners; however they can also use fixed capital account according to their business and preference.

10 comments… add one
  • atale felix

    infact irealy want to thank the owners of this lecture notes,this to mean how helpfull its for me, once again thank u and keep doing the good work.

  • sanjay sah

    it is in easier language so it very helpful…

  • Dogbe Francis

    To be frank is very understandable

  • Tanya sharma

    It is very easier to understand

  • Robert Celestine

    This lecture has been simplified into it’s simplest terms, it’s really understandable from this point.
    Thank you dear admin

  • partham's ADB

    it is easy to understand and explain it simple term.
    thank you….

  • Deepak sharma

    Good explaination for learners

  • samuel adebayo

    This write up is explanatory and easily understandable. kudos to the author.

  • kajal katyal

    Easily understandable

  • Viola T

    The summary is easy to understand and writen in the simplest terms which makes it easy for the reader to understand more. Thank you

Leave a Comment

Related pages

concept of materialitydifference between creditor and debtorshort term loan advantages and disadvantagesdisadvantages of brandingadvantage of fifo methodcrr and slr meaningexamples of private goodsmonopolistic economy definitionexample of complement goodsadjusting journal entries unearned revenueexamples of consumer durablesoperating profit ratio analysiswhat is marginal costing in management accountingadvantages of urbanizationmarket skimming and market penetrationhire purchase disadvantagesprofit push inflation definitionbills receivable accounting entriesficitiouspenetration pricing strategy exampleinterest sensitive liabilitiesan example of complementary goods would beeffectiveness of autocratic leadershipskimming in marketingvertical horizontal and conglomerate mergersdifference between normal and inferior goodsunqualified auditjournal entry for prepaid rentfeatures of capital budgeting decisiongatt full formdisadvantages of absorption costingcharacteristics of a capitalist economydiminishing balance method of depreciationdisadvantage of fdimeaning of cagrwhat is meant by consigneeexamples of substitute goods and complementary goodsbill discounting without recoursewhat is the difference between durable and nondurable goodspayback method of investment appraisalurbanisation benefitswhat are the advantages of urbanizationwhat are characteristics of a command economyconsignee copycharacteristics of authoritarian leadershipadvantages of conglomerate diversificationdifference between bearer cheque and order chequedisadvantages of variable costingadvantages and disadvantages of industrial agricultureexamples of private goodsinterest sensitive liabilitiesdiversifiable riskspush inflationasset vs liability definitionnegatives of capitalismmain features of globalisationexample of perfect competition in the philippinesexamples of indirect quotationcomplementary goodsadvantages and disadvantages of urban and rural lifeadvantages and disadvantages of fifocost push inflation occurs whenexamples of revenue expenditure and capital expenditureindirect quotation examplesfull meaning of fmcgsubstitute and complementary goodsexamples of conglomerate merger companiesinventory turnover ratio interpretationdistinguish between capital expenditure and revenue expenditureautocratic leadership businesssundry items examplesjoint venture disadvantagesmonopolistic competition market structures