Question 18 of 43
Q.State the differences between fixed capital method and fluctuating capital method.
Puducherry TnboardTamil Nadu HSC (DGE) Commerce Board 2020Subjective· 3mImportance★★★★★
42% · 18/43 Questions
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Start your 14-day free trial to unlock the full solution →Fixed capital method keeps two accounts (Capital + Current) with an unchanging capital balance; fluctuating capital method keeps only one Capital account whose balance changes every year.
In the Tamil Nadu HSC Accountancy syllabus, partners' capital may be maintained under either method. The differences are:
| Basis | Fixed Capital Method | Fluctuating Capital Method |
|---|---|---|
| Number of accounts | Two accounts - Capital A/c and Current A/c | Only one account - Capital A/c |
| Change in balance | Capital balance remains fixed (changes only when capital is introduced or withdrawn) | Capital balance changes (fluctuates) every year |
| Adjustments (interest on capital, drawings, salary, share of profit/loss) | Recorded in the Current A/c | Recorded in the Capital A/c itself |
| Nature of balance | Capital A/c always shows a credit balance; Current A/c may show debit or credit balance | Capital A/c may show debit or credit balance |
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