Why is it that the Capital account of a partener does not show a ' Debit balance' in spite of regular and consistent losses year after year?
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The capital account of a partner only shows a debit balance when said partner withdraws an amount from his investment or he withdraws from the partnership.
It does not show a debit balance in spite of regular and consistent losses year after year because these losses are first applied to the company's assets or is recorded as part of a company's liability.
It does not show a debit balance in spite of regular and consistent losses year after year because these losses are first applied to the company's assets or is recorded as part of a company's liability.
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Answer:
Capital Account shows a credit balance only under fixed capital account method.As all other adjustments are made through current account. Capital account only records the introduction of capital and it remains fixed year after year except when there is introduction of additional capital and withdrawal of capital.
But under fluctuating capital method,all adjustments are made through capital account of the partners.So, in this case it may have a debit or credit balance.
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