Question

give any three points of distinction between fixed and fluctuating capital account
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Answer 1

Distinction between fixed account and fluctuation account:

• In fixed account, capital of the partner remained fixed whereas in fluctuating account, the capital of the partner vary

• In fixed capital account, two sets of accounts are maintained for each partner whereas in fluctuating account, only one account is present

• In fixed account, all adjustments are made by partner with partnership firm whereas in fluctuating account, all adjustments are made in the capital account of the partner.

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Answer 2

Under Fixed Capital Account, Fixed Capital Account and Current Account are maintained while under fluctuating capital account, only capital account is maintained.

Explanation:

Distinction between Fixed and Fluctuating Capital Account.  

• Under Fixed Capital Account, Two accounts are maintained for each partner, i.e., Fixed Capital Account and Current Account whereas under fluctuating capital account, only capital account is maintained.
• Under Fixed Capital Account, Balance in Fixed Capital Account does not change except when further capital is introduced or capital is withdrawn whereas the balance changes with every transaction of the partner with the firm.
• Under Fixed Capital Account, Transactions relating to Capitals are recorded in Fixed Capital Accounts and transactions for drawings, interest on drawings, interest on capital, salary, commission, share of profit or loss are recorded in Current Account whereas all transactions whether for capital, drawings, interest on drawings, interest on capital, salary, commission, share of profit or loss are recorded in Capital Account.
• Fixed Capital Account always shows credit balance in Capital Account whereas Fluctuating Capital Account can also show debit balance.

This was the distinction between Fixed and Fluctuating Capital Account.