Question

What is Fluctuating Capital Method? (Answer in one sentence)

Answer 1

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 is defined as Fluctuating Capital Method

Answer 2

Fluctuating Capital method is that method of keeping the account of the partners in which the capital in the account of the partner keep fluctuating. Apart from the initial investment, the account of the partner is also credited with additional capital during the year.

The account of a partner can be managed by two methods:

1) Fixed capital method

2) Fluctuating capital method