Partners Capital Account – Capital Accounts of Partners which the account which contains the details of the transactions done with the partners (Partners Capital Account Format is given in this Post). The capital contributed by each partner will be credited to his capital account. Each partner is having his own separate capital account.
The capital account of the partners are generally maintained in the following two ways:
- Fixed Capital Accounts
- Fluctuating Capital Accounts
Fixed Capital Accounts:
When the partners agree among themselves that the capital contributed by them will remain same throughout the tenure of the partnership otherwise than by a special agreement then the capital of the partners is said to be fixed. In this case, a separate account known as partner’s current account is also required to be prepared as the capital account of the partners will remain same. The transactions related to partner’s capital will be shown in the capital account all other transactions relating to drawings, interest on capital or drawings, salary or commission to the partners, share of profit or loss etc are recorded in the newly opened current account of partners. Partners Capital Account Format for Fixed Capital can appear like this : –
Fluctuating Capital Accounts:
Distinction between Fixed Capital Accounts and Fluctuating Capital Accounts:
| Basis of Distinction | Fixed Capital Accounts | Fluctuating Capital Accounts |
|---|---|---|
| Number of Accounts | There are two accounts prepared under fixed capital account method- i) capital account & ii) current account | There is only one account prepared under fluctuating capital account method- capital account |
| Change in Capital | When the capitals are fixed, the balances in capital account usually remain unchanged during the lifetime of business, except when capital is introduced or withdrawn permanently | When the capitals are fluctuating, the balances in capital accounts go on changing from time-to-time |
| Appearance in Balance Sheet | Both capital and current accounts appear | Only capital account appears |
| Debit or Credit Balance | Always credit balance | Sometimes shows debit balance & sometimes credit balance |