Page 236 - VIRANSH COACHING CLASSES

6.5 D) Fixed and Fluctuating Capital Method
Fixed Capital Method : Under Fixed Capital Method a separate Current Account is prepared
for each partner. All the adjustment are made in the Current Accounts. Then the balance on Current
Account is transferred to Capital Account of the partner.
Accounting Procedure :
1. Transfer the balance on insolvent partner’s Current Account to Capital Account. The entry will
be
Insolvent Partner’s Current A/c ...............................................Dr.
To Insolvent Partner’s Capital A/c .....................................Dr.
(Being insolvent partners Current A/c transferred to Capital A/c)
2. Transfer the deficiency on Insolvent Partners Capital account to solvent partners Capital
Accounts in their Profit sharing ratio.
Solvent Partners Capital A/c ...................................................Dr.
To Insolvent Partners capital A/c ......................................Dr.
(Being insolvent partners deficiency transferred to solvent partners)
3. Transfer the balance of solvent partners Current Account to their Capital Accounts.
Solvent Partners Current A/c ...................................................Dr.
To Solvent Partners Capital A/c .........................................Dr.
(Being Current Account balance transferred.)
4. Final settlement of Solvent Partners Capital account.

Solvent Partner’s Capital A/c ..................................................Dr.
To Cash / Bank A/c ............................................................Dr.
(Being Final settlement made by paying cash)

6.5 E) Fluctuating Capital Method
Under Fluctuation Capital Method, no Current Accounts are opened. All the adjustment are
made in the Capital Account of the partners. Deficiency of insolvent partner’s capital account is trans-
ferred to solvent partner’s capital accounts in their Profit Sharing Ratio.

Solvent Partner’s Capital A/c ..................................................Dr.
To Solvent Partners Capital A/c .........................................Dr.
(Being insolvent partner’s capital A/c transferred)

227