Q.P and Q are partners with fixed capitals of ₹4,00,000 and ₹3,00,000 respectively as on 1st April 2023. The partnership deed provides:

Because capitals here are fixed, the Capital Accounts themselves stay untouched at their original balances, and every other item — interest, salary, drawings, and profit share — is instead worked out entirely inside separate Current Accounts.

Step 1: Compute each item

Interest on Capital @5% p.a.: P = ₹4,00,000 × 5% = ₹20,000; Q = ₹3,00,000 × 5% = ₹15,000

Salary to Q: ₹3,000 × 12 = ₹36,000

Share of divisible profit (equal): P = ₹60,000; Q = ₹60,000

Drawings: P ₹20,000, Q ₹15,000

Interest on Drawings: P ₹800, Q ₹600

Step 2: Capital Accounts (Fixed)

Under the Fixed Capital Method, the Capital Account carries only the originally contributed capital and remains unchanged, since no fresh capital was introduced or permanently withdrawn during the year.

Step 3: Current Accounts

Debit side:

Cross-check against Illustration 8, which uses identical figures under the Fluctuating Capital Method: P's combined position there is ₹4,59,200, exactly equal to ₹4,00,000 (fixed capital) + ₹59,200 (current account balance) here, and Q's is ₹3,95,400, e …

The most frequent error under the Fixed Capital Method is crediting interest on capital, salary, or share of profit directly to the Capital Account instead of the Current Account — under this method the Capital Acco …