Difference Between Fixed And Fluctuating Capital Method System Distinction & Definition 

Learn The Difference Between Fixed And Fluctuating Capital Method System Distinction & Definition .

Fixed Capital Method Definition –

The method of maintaining capital accounts, in which the amount of capital remains fixed year after year, is called Fixed Capital Method .

 

 

FIXED CAPITAL METHOD :

 

1. In this Fixed capital method current accounts must be prepared.
2. Balance on partners capital A/c remains fixed from year to year .
3. Adjustments like drawings, interest on capital, Commission to partner etc. are recorded in Current A/c.
4. Partners Capital A/c as well as Partners Current A/c both are prepared.
5. Additional capital introduced and capital withdrawin are recorded in Capital A/c. But drawings out of profits are recorded in partners Current A/c & Not in the Partners Capital A/c.

 

Difference Between Fixed And Fluctuating Capital Method :

Fluctuating Capital Method Definition –

A capital method, in which an amount of capital of partners changes due to various adjustments passed in the capital accounts, is said to be a Fluctuating Capital Method Or Floating Capital Method .

FLUCTUATING CAPITAL METHOD :

 

1. In the fluctuating capital method Partners Current Accounts are not prepared.
2. Balance on partners Capital A/c always fluctuates.
3. Adjustments like drawings, interest on capital, Commission to partner etc. are recorded in Capital A/c itself.
4. Only Partners Capital A/c is maintained.
5. Additional capital introduced and Capital withdrawn are recorded in Capital A/c.