Home › Tamil Nadu HSC (Class 12) › accountancy › Accounts of Partnership Firms - Fundamentals › Under the fixed capital method, which item appea…
Under the fixed capital method, which item appears in the partner's CAPITAL account?
AAdditional capital introduced by the partner
BInterest on the partner's capital allowed
CInterest charged on the partner's drawings
DThe partner's share of the year's profit
Answer & Solution
Correct answer: A. Additional capital introduced by the partner
1. Under the fixed capital method the capital account is deliberately kept narrow.
2. It is credited with the original capital and with any additional capital introduced, and debited with capital permanently withdrawn.
3. The textbook states that no other items are debited or credited to this account.
4. Interest on capital, interest on drawings, salary, commission and the share of profit or loss all go to the current account instead.
5. That is why the capital account always shows a credit balance under this method.
_Source: TN HSC Class 12 Accountancy (Samacheer Kalvi, Govt of Tamil Nadu), Unit 3 "Accounts of Partnership Firms - Fundamentals", §3.6.1_
Related questions
A firm follows the fixed capital method. Which combination correctly describes the closingWhich statement about a partner's loan to the firm is correct?Net profit is Rs 18,000 before interest on capital and drawings. Interest on capital totalProfit after interest on capital and salary is Rs 2,20,000. A partner is entitled to 10 peNet profit before any commission is Rs 1,10,000. One partner gets 10 per cent of profit beOpening capital is Rs 60,000 and a further Rs 10,000 is introduced on 1 April in a year enCapitals are Rs 4,00,000 and Rs 2,00,000 and profits are shared 3:2. Profit before interesA partner withdraws Rs 4,000 at the end of each quarter. Interest on drawings is 6 per cen