Partners Capital Account | Accounts Class XII

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:

  1. Fixed Capital Accounts
  2. 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:

When the capital of the firm is not fixed and it keeps on changing from time to time then fluctuating capital account is prepared. It contains the balances of capital, additional capital introduced, drawings, interest on drawings, salary/ commission payable to partners, interest on capital, share of capital/loss etc. Partners Capital Account Format for Fluctuating Capital can appear like this : –

Distinction between Fixed Capital Accounts and Fluctuating Capital Accounts:

Basis of DistinctionFixed Capital AccountsFluctuating Capital Accounts
Number of AccountsThere are two accounts prepared under fixed capital account method- i) capital account & ii) current accountThere is only one account prepared under fluctuating capital account method- capital account
Change in CapitalWhen the capitals are fixed, the balances in capital account usually remain unchanged during the lifetime of business, except when capital is introduced or withdrawn permanentlyWhen the capitals are fluctuating, the balances in capital accounts go on changing from time-to-time
Appearance in Balance SheetBoth capital and current accounts appearOnly capital account appears
Debit or Credit BalanceAlways credit balanceSometimes shows debit balance & sometimes credit balance

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