When partners maintain fixed capital accounts, which item is normally recorded in the partners' current accounts?
Correct answer: B. Drawings and interest on drawings
- A. Additional permanent capital
- B. Drawings and interest on drawings
- C. Original capital contribution
- D. Capital introduced at admission
Explanation
Under the fixed capital method, the capital account remains unchanged unless the agreed permanent capital changes. Drawings, interest, salary, commission and profit shares are generally recorded in current accounts. Additional permanent capital is credited to the capital account.
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About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
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