Q.What is meant by fixed capital method ?

Fixed capital method: Capital account stays fixed; a separate Current account records all yearly adjustments.

In a partnership, capital accounts can be kept by the fixed or the fluctuating method. Under the fixed capital method, two accounts are maintained for each partner:

1. Capital Account — its balance remains fixed and changes only when the partner brings in additional capital or permanently withdraws part of the capital.
2. Current Account — records all the recurring/periodic items: interest on capital, partner's salary or commission, share of profit or loss, interest on drawings and drawings. …