Difference between Fixed Capital Method and Fluctuating Capital Method

The following are the points of differences between Fixed Capital Method and Fluctuating Capital Method.

Distinction between Fixed Capital Method and Fluctuating Capital Method

BasisFixed Capital MethodFluctuating Capital Method
No. of AccountsUnder this method, two different accounts are maintained for each partner of the firm. These are Partners’ Capital Account and Partners’ Current Account.Under this method, only one account is maintained for each partner of the firm i.e. Partners’ Capital Account.
Capital BalanceGenerally, the capital balances of the partners remain unchanged except in case where capital is withdrawn or additional capital is introduced.Under this method, capital balances of the partners keep on changing. In other words, the capital balances keep fluctuating.
Credit or Debit
Balance
Under this method, Partners’ Capital Account always reveals a credit balance.Under this method, Partners’ Capital Account may either show a credit balance or a debit balance.
Recording of
Transactions
All the transactions related to the partners such as salary, drawings, interest on drawings, interest on capital, etc. are recorded in the Partners’ Current Account and not in the Partner’s Capital Account.As under this only one account is maintained i.e. Partners’ Capital Account, therefore, all the transactions related to the partners such as salary, drawings, interest on drawings, interest on capital, etc. are recorded in one single account.

Also, Read

Balance Sheet

The balance sheet is the last financial statement that is prepared by any organization. This statement helps to ascertain the true financial position of an enterprise at the end of an accounting period

Profit and Loss Account

A profit and Loss Account is the second financial statement prepared by an organization. This account is prepared to ascertain the net results of a firm in form of net profit earned or net loss incurred during an accounting period.

Accounting Software

Accounting software is an integral part of the computerized accounting system. The accounting software should be selected after considering the level of skill and proficiency of the accounting professionals.

What are Accounting Reports?

Accounting Reports: When the collected data is processed and manipulated in a useful sense that can be understood by the users without any ambiguity, then it becomes information.

Transaction Processing System

Transaction Processing System (TPS) refers to a computerized system that records, processes, validates, and stores routine transactions that occur in various functional areas of a business on daily basis.

Discover more from Home of learning

Subscribe now to keep reading and get access to the full archive.

Continue reading

Scroll to Top