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Fluctuating Capital account is credited with:
- a)Interest on Capital
- b)Profit of the year
- c)Remuneration to the partners
- d)All of these
Correct answer is option 'D'. Can you explain this answer?
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Fluctuating Capital account is credited with:a)Interest on Capitalb)Pr...
Fluctuating Capital Method
Under this method as is apparent from the name, capital of each partner goes on changing from time to time. Each partner will have his separate capital account, which will be credited by his initial investment and any additional capital introduced during the year will also be credited to his capital account.
All the adjustments, which result decrease in capital will be debited to partner’s capital, such as drawing made by each partner, interest on drawings and share of loss. On the other hand, adjustments resulting increase in capital will be credited to partner’s capital, like interest on capital, partners salary if any, partner’s share of profit etc.
Balance of each partner’s capital account will be shown in the balance sheet. Debit balance of partner’s capital account is shown on the asset side and credit balance is shown on the liability side.
Explanatory Note: It should be noted that where nothing is specifically mentioned the capital method to be adopted will be the fluctuating capital method.
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Fluctuating Capital account is credited with:a)Interest on Capitalb)Pr...
Fluctuating Capital Account and its credits
Fluctuating Capital Account is a type of capital account where the capital balance of the partners changes with the change in the profits or losses of the partnership firm. The capital balance of each partner is calculated at the end of each financial year and is adjusted according to the profits or losses of the firm. The credits to the Fluctuating Capital Account are:
1. Interest on Capital
The partners may be entitled to interest on the capital contributed by them to the partnership firm. Interest on capital is calculated at a predetermined rate and is credited to the Fluctuating Capital Account of each partner.
2. Profit of the year
The profits earned by the partnership firm during the financial year are credited to the Fluctuating Capital Account of each partner. The amount of profit credited to each partner's account is in proportion to their capital contribution.
3. Remuneration to the partners
Partners may be entitled to a salary or remuneration for the services they provide to the partnership firm. The remuneration is usually calculated as a percentage of the profits earned by the firm. The remuneration paid to the partners is credited to their Fluctuating Capital Account.
4. All of these
All the above-mentioned credits, i.e., interest on capital, profit of the year, and remuneration to the partners, are credited to the Fluctuating Capital Account of each partner.
Fluctuating Capital Account is a type of capital account where the capital balance of the partners changes with the change in the profits or losses of the partnership firm. The capital balance of each partner is calculated at the end of each financial year and is adjusted according to the profits or losses of the firm. The credits to the Fluctuating Capital Account are:
1. Interest on Capital
The partners may be entitled to interest on the capital contributed by them to the partnership firm. Interest on capital is calculated at a predetermined rate and is credited to the Fluctuating Capital Account of each partner.
2. Profit of the year
The profits earned by the partnership firm during the financial year are credited to the Fluctuating Capital Account of each partner. The amount of profit credited to each partner's account is in proportion to their capital contribution.
3. Remuneration to the partners
Partners may be entitled to a salary or remuneration for the services they provide to the partnership firm. The remuneration is usually calculated as a percentage of the profits earned by the firm. The remuneration paid to the partners is credited to their Fluctuating Capital Account.
4. All of these
All the above-mentioned credits, i.e., interest on capital, profit of the year, and remuneration to the partners, are credited to the Fluctuating Capital Account of each partner.
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Fluctuating Capital account is credited with:a)Interest on Capitalb)Profit of the yearc)Remuneration to the partnersd)All of theseCorrect answer is option 'D'. Can you explain this answer?
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