The following are the points of differences between Fixed Capital Method and Fluctuating Capital Method.
Distinction between Fixed Capital Method and Fluctuating Capital Method
| Basis | Fixed Capital Method | Fluctuating Capital Method |
|---|---|---|
| No. of Accounts | Under 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| Capital Balance | Generally, the capital balances of the partners remain unchanged except in case where capital is withdrawn or additional capital is introduced.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. |
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