2. PARTNERSHIP ACCOUNTS
Generally there is no difference between the
accounts of sole trading concern and a partnership
concern. However there are certain special aspects
applicable to partnership accounts which require
special mention. These are discussed below ;
3. Capital Accounts of Partners
Capital accounts are personal in
nature in which the transactions relating to the
partners of a firm are recorded. There will be
minimum two partners so separate capital
accounts are to be prepared in order to ascertain
their individual share.
4. Items on capital
account of partners
Debit Side Credit Side
1. Drawings [Cash / Kind]
2. Interest on Drawings
3. Share of loss [ As per profit
and loss A/c]
1. Opening of capital[ Capital
introduced in the beginning ]
2. Additional capital introduced.
3. Assets brought in.
4. Interest on capital
5. Salary to the partner.
6. Commission to the partner.
7. Share of profit [ As per
profit & loss a/c ]
5. Methods of Maintaining Capital
Accounts
Mainly there is two methods of
maintaining capital accounts of partners.
Fixed Capital Method
Fluctuating Capital Method.
6. Fixed Capital Method
This method is known as fixed capital method as
the original capital invested by any partner remains the
same unless additional capital is brought in or part of the
capital is withdrawn as per agreement. Hence , all items
like drawings, interest on drawings, interest on capital,
salary, commission, share of profit or loss, etc., are not
to be shown in their capital accounts. A separate account
called current account is opened in the name of partners
for this purpose.
At the end of an accounting period , current
account should be balanced if it shows a debit balance, it
should be shown in the asset side of balance sheet and if
it shows a credit balance, it should be shown in the
liability side of balance sheet.
7. Proforma
Partners’ Capital Account
Date Particular Amount
Rs.
Date Particular Amount
Rs
To Cash/Bank
(Amount
withdrawn out of
capital)
Balance c/d
Xxx
Xxx
By Balance b/d
Cash/Bank/
Assets
(Additional
Capital
introduced)
Balance b/d
Xxxx
Xxx
xxxx xxxx
xxx
Dr Cr
8. Proforma
Partners’ Current Account
Date Particular Amount
Rs
Date Particular Amount
Rs.
To Drawings
To interest on drawings
To Profit & loss
Appropriation a/c
(Share of loss in case of
loss)
To Balance c/d
xxx
xxx
Xxx
Xxx
By Balance b/d
By Interest on Capital
By Salary
By Commission
By P&l Appropriation
a/c (Share of profit
in case of profit)
Balance b/d
Xxx
xxx
xxx
Xxx
xxx
xxxx xxxx
xxx
Dr Cr
9. Fluctuating Capital Method
According to the fluctuating capital
method, capital balance of partners keeps on
fluctuating from year to year .Under the
fluctuating capital method , only capital account
is maintained. The yearly adjustments are made
directly in the capital account.
10. Proforma
Partners’ Capital Account
Date Particular Amount
Rs.
Date Particular Amount
Rs
Drawings
Interest on drawings
Profit & loss Appropriation a/c
(Share of loss in case of loss)
Balance c/d
xxx
Xxx
Xxx
xxx
Balance b/d
Assets
Cash/Bank/
(Additional Capital
introduced)
Interest on Capital
Salary
Commission
P&l Appropriation a/c
(Share of profit in case of
profit)
Balance b/d
Xxxx
xxx
Xxx
xxx
xxx
xxx
xxx
xxxx xxxx
xxx
Dr Cr
11. Difference Between Fixed Capital & Fluctuating
Capital Methods
Points Fixed Capital Method Fluctuating Capital Method
1. Number of
Accounts
Two accounts, viz., capital and
current account.
One account, viz., capital
account.
2. Nature of
Account / Balance
Remains unaltered Fluctuates.
3. Adjustments
Adjustments like interest on
capital, drawings, interest on
drawings, etc. are made in the
current accounts.
Adjustments are made in
the capital account itself.
4. Appearance in
the balance sheet
Both capital and current
accounts appear.
Only capital account appears
.
5. Specific
mention
It should be specifically
mentioned in the partnership
deed.
Not necessary.
6. Credit / Debit
balance
Fixed capital accounts always
shows a credit balance.
Fluctuating capital may some
times show a debit balance.
