Principles of Accounts

WHERE PARTNERS MAINTAIN A FLUCTUATING CAPITAL ACCOUNT, PARTNERS’ SHARE OF PROFIT IS CREDITED TO

  • A. capital account ✓
  • B. profit and loss appropriate account
  • C. current account
  • D. profit and loss account

 

In partnership where partners maintain a fluctuating capital account, partners’ share of profit is credited to capital account.

Steps to Determine the Answer:

  1. Partners’ share of profit in a partnership is a component of their ownership interest in the firm.
  2. In a fluctuating capital account system, all transactions related to partners’ interests, including profits and losses, are recorded in the partners’ capital accounts.
  3. Therefore, when partners receive their share of profit, it is credited to their capital accounts to reflect the increase in their ownership stake in the partnership.