Question

Why is it that capital account of a partner does not show a debit balance inspite of regular and consistent losses year after year?

Answer 1

Captital A/c of a partner can show a negative balance but only in the case of Fluctuating Capital A/c. It is so because In case of Fluctuation Capital only one A/c is maintained which records all transactions related to partner. But in Case of fixed capital, Capital A/c will never show a debit balance because here two A/c will be maintained of one partner and all the transactions related to loss or profit or IOD, will be recorded in the current A/c. Only permanent withdrawal of capital or additions of capital are shown in Capital A/c. Now a partner can never withdraw more than he introduced. Hence it will never show a debit or negative balance.