What is difference between Fixed Capital and Fluctuating Capital Accounts

Difference between Fixed Capital and Fluctuating Capital Accounts

Accountancy class 12

Fixed Capital - Fixed Capital Account means the owners/partners contribute an amount as capital at the time of commencing the business which remains in the business at the same amount. This is often the method followed in established Partnership Firms where the contribution of capital usually stands in proportion to the profit-sharing ratios among the partners. But as the name indicates, Fixed Capital Account simply means that the Capital Account is carried from one period to another at the same amount.

Fluctuating Capital Accounts - Mostly in case of sole trader-ship, the sole owner prefers to maintain a single account in the owner’s name called Fluctuating Capital Account which keeps on fluctuating because of profits, interest on capital, drawings, interest on drawings etc. and any other transactions with the owner are entered in one single account called Capital Account. Since the balance of the capital account keeps fluctuating, it is called Fluctuating Capital Account.

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