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What do you mean by fixed and flactuating capital

Posted by Ranbir Sharma Ranbir Sharma 4 years ago

CBSE > Class 12 > Accountancy

1 answers

Yogita Ingle 4 years ago

(a) Fixed Capital Account
A firm prepares Fixed Account with very basic capital related transactions. Unlike the Capital account, under these repetitive capital related transactions does not affect the Capital balance. Like, Salary of employees, commission for employees, interest on capital, interest on drawings, etc.

The firm opens the account in the name of “Fixed Capital Account”. Initial Investment will appear on the credit side as the starting entry. Only 2 kinds of Capital related transactions can affect its balance :

(1) Addition of Capital

(2) Permanent Withdrawal of Capital

(b) Current Account

It includes all the capital related transactions other than the initial investment of capital, addition of capital and withdrawal of capital. Hence, It mainly includes items such as :

1. Interest on Capital

2. Interest on Drawings

3. Salaries and other remuneration to employees

4. Commission to employees and even more.

ANSWER

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