Question

Answer in one sentence only : 1] What is fluctuating capital ?
2] Why is partnership deed necessary ?​

Answer 1

1) Fluctuating capital method is one in which capital balances of the partners go on changing every year due to entries for adjustments like drawings, interest on capital and drawings, salaries, commission, allowances, etc. Recorded in their capital accounts.

2) A partnership deed is prepared to establish a partnership officially that has all the terms and conditions associated with it to avoid disputes in future. ... * The various terms specified in the partnership deed are salary, drawings, interest on capital, profit and loss sharing and many more.

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Answer 2

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1. Fluctuating Capital Definition: A partnership term. When the capitals of partners are fluctuating, all adjustments with regards to the interest on capitals, interest on drawings, partners salaries etc. are passed through the capital accounts of the partners.
2. Having a partnership deed provides a legal responsibility between partners of the firm. ... It regulates the rights, duties, and liabilities of each partner. It helps to avoid any misunderstanding between the partners because all the terms and conditions of the partnership have been laid down beforehand in the deed.