Five difference between fixed method and …

Fixed Capital Method Fluctuating Capital Method 1.Number of Accounts Two accounts, viz., capital and current account. One account, viz., capital account. 2. Nature of Account / Balance Remains unaltered Fluctuates. 3. Adjustments Adjustments like interest on capital, drawings, interest on drawings, etc. are made in the current accounts. Adjustments are made in the capital account itself. 4. Appearance in the balance sheet Both capital and current accounts appear. Only capital account appears . 5. Specific mention It should be specifically mentioned in the partnership deed. Not necessary. 6. Credit / Debit balance Fixed capital accounts always shows a credit balance. Fluctuating capital may some times show a debit balance.

In fixed method capital is constant when capital is not introduced or withdrawn whereas in fluctuating method it changes every year. In fixed method capital account never shows debit balance whereas in fluctuating method capital account can show debit balance. In fixed method two accounts are prepared whereas in fluctuating method only one account is prepared. In fixed method capital changes only in two codition when capital is introduced or withdrawn whereas in fluctuating method all adjustment are made in capital account.

In fixed capital account method, two separate accounts are maintained for each partner capital account and current account. In fluctuating capital accounts method, each partner maintains only one account, i.e. capital account