Capital accounts of partners

CAPITAL ACCOUNTS OF THE PARTNERS

Capital accounts of the partners can be maintained in two ways;

1) Fixed Capital Accounts

2) Fluctuating Capital Accounts

1) Fixed Capital Accounts

Under this method the capital invested by the partners remains constant unless additional capital is brought in or some part of the existing capital is withdrawn permanently by agreement. Entry is made in the Capiatl accounts only to record the capital inroduced or withdrawn permenently by the partners . All the other transactions relating to drawings, interest on capital or drawings, salary or commission to the partners, share of profit or loss etc are recorded in the newly opened Current Accounts.


Thus the two accounts are maintained in the books of the firm are:

a) Capital accounts b) Current accounts

PROFORMA OF CAPITAL ACCOUNTS

CAPITAL ACCOUNTS OF THE PARTNERS

Particulars  A  B  C Particulars  A  B  C

To Cash / Bank A/c (withdrawl of capital account)

To balance c/d

By balance b/d(opening balance)

By cash/ Bank A/c(additional capital introduced)

CURRENT ACCOUNTS

Particulars  A  B  C  Particulars  A  B  C

To balance b/d

To drawings

To interest on drawings

To P & L appropriation

To Balance c/d

By balance b/d(in case opening balance)

By Interest on Capital

By Salary

By Commission

By Profit and Loss appropriation A/c

2) Fluctuating Capital Account

Under this method only one account is maintained i.e. Capital account. All the entries relating to drawings, interest on drawings, interest on capital account, salary, commission, profit or loss share etc are recorded in the capital accounts.

CAPITAL ACCOUNTS

Particulars   A  B   C  Particulars   A   B   C

To drawings  A/c

To interest on drawings A/c

To P & L appropriation A/c(Loss share)

To Balance c/d

By balance b/d

By Interest on Capital A/c

By Salary A/c

By Commission A/c

By Profit and Loss appropriation A/c (Profit share)

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