Distinction between Fixed Capital Method and Fluctuating Capital Method
The main differences between the two methods of maintaining capital accounts are as follows:-
Basis of distinction |
Fixed Capital
|
Fluctuating Capital
|
1. Change in capital | The capital normally remains unchanged except under special circumstances. | The capital is changing from period to period. |
2. Number of Accounts | Each partner has two accounts, namely, Captial Account and Current Account. | Each partner has only one account i.e., Capital Account. |
3. Balance | Capital Account shows always a credit balance.
Current account may sometimes show debit or credit balance. |
Capital Account shows always a credit balance. |
4. Adjust- ments | All adjustments relating to partners are recorded in the Current Accounts. | All adjustments relating to partners are recorded directly in the Capital Accounts itself. |