Question

Distinguish between fixed capital and fluctuating capital​

Answer 1

No. Of accounts

• Fixed capital - two accounts for each partner I.e fixed capital account and current account.
• Fluctuation capital - only one i.e Capital account.

Frequency of change

• Balance in fixed capital account does not change except when further capital is introduced or capital is withdrawn.
• Balance changes in fluctuations account with every transactions of partner of the firm.

Recording the transaction

• Fixed capital - transactions related to capital are recorded in fixed capital accounts and transactions of drawing, interest on drawing, interest on capital, salary, commission, share of profit and loss are recorded in current account.
• All transactions whether for capital, drawing, interest on drawing, interest on capital, salary, commission, share of profit and loss are recorded in capital account.

Balance

• Credit balance in capital account in fixed capital account.
• Fluctuation capital account shows debit balance.

Thanks.

Answer 2

Answer:

Explanation:

Fixed Capitals: -

Two accounts are maintained i.e., Capital and Current Accounts

Balance in the capital account remains the same except when fresh capital is introduced or the withdrawal of capital.

All adjustments like interest on capital, drawings, salary, commission etc. are made through current account.

Capital account will always have a credit balance while current account may have a debit or credit balance.

Fluctuating Capital: -

Only one account is maintained i.e., Capital Account.

Balance in the capital account changes every year because of adjustments like salary, commission, interest on drawings etc.

 All adjustments are made through capital account.

fluctuating capital account may have a debit balance.