0
It is important for the current accounts and the capital accounts to be kept seperate as this is good accounting practise. By keeping these accounts seperate, it allows the partners to understand the amount they earn through trading activities such as earnings of residual profit/loss, earning of salary, earning of interest which are entered in the current account. Likewise, keeping them seperate allows partners to identify their capital investement position within in the partnership. Thus, allowing partners experience less difficulty in calculating the amount of interest on capital for each partner.
Hope this helps
Wiki User
∙ 10y ago
Nsiah Emmanuel Ampon...
Interest on capital credited to partners is actually based on a partner's investment position in the partnership.
thus balance per the agreement on the partnership
Godfrey Franecki
Add your answer:
Earn +20 pts
What are the difference between fixed capital and fluctuating capital?
Difference between Fixed and Fluctuating Capital AccountsFixed and fluctuating capital accounts are the terms which are often used in the context of partnership. Partners can maintain the capital accounts in two ways one is fixed capital account and other is fluctuating capital accounts, let's look at the difference between both of them - Fixed Capital Account - Under this system, the capital which is introduced by partners will remain fixed throughout the life of the partnership. Hence under this method two type of accounts are made one is capital account and other is current account. Therefore all entries relating to drawings, interest on capital, profit and loss share of partner are made in a separate account for each partner, it is called current account of partners. However when partner brings additional capital or withdraws capital permanently, then capital account is credited or debited respectively.Fluctuating Capital Account - Under this method capital account of partners will not remain fixed rather they will keep fluctuating from time to time. In this method all the entries related to drawings, interest on capital and share of profit and loss of partner are recorded in capital account, hence in this method there is no need for current account.Fluctuating capital account method is usually preferred by partners; however they can also use fixed capital account according to their business and preference.
What is difference between current account and capital account?
Current account shows current year current year transactions and capital account shows both current transactions relating to businessman and initial capital of businessman.According to FEMA Act 2000, "There is no restrictions on holding or exchanging of foreign currency under Current Account . But Any foreign currency is under capital account , then it must be controlled under the regulations of RBI."In partnership , partners can make current account separately from capital account in which they can show only their salary, interest on capital and interest on drawing etc. and in capital account, they can show only their capital invested in the business of partnership.USA has divided export and import transactions into 2 accounts: One is the current account and other is the capital account. The current account includes in international trade in goods and services and with earnings on investments. The capital account includes of capital transfers and the acquisition and disposal of non-produced, non-financial assets.In general Current account is used for receipt and payment cash and non capital items and capital account is used for sources and utilization of capital.
What is the relationship between capital account balance and current account balance?
The balance of payments, then, is the sum of the balance on current account and the balance on capital and financial account. It is important to understand that the deficit indicated by the current account is financed through activities recorded on the capital and financial account. The deficit on the current account must be exactly offset by the surplus on the capital and financial account (if it is not, net errors and omissions will correct it). This means then that the sum of the current account and the capital and financial account is equal to zero.
Why current accounts are prepared along with capital accounts in partnership?
To find out total liability of partners to the firm.
In economics what is a capital account?
A capital account in economics, is one of two primary components, the balance of payments, and the current account. The current account reflects the nation's net income, and the capital account reflects the net change in the national ownership of assets.
Distinguish between Current account and capital account?
A current account is the balance of net transfers, trade in goods, net investment income from external assets and trade in services. A capital account shows the outflows and inflows of different forms of capital.
Collect data on India's current account balance capital account balance and forex reserves for the period 2001-2006?
Collect data on India's current account balance capital account balance and forex resevers for a period 2001-2006?
What are the account titles used in the capital account?
The purpose of Fund Accounting is separation of records. This is done by use of categories (titles). The primary four categories of funds are the, Current Unrestricted Fund, Current Restricted Fund, restricted Endowment Fund, and the Fixed Asset Fund. These Funds may be "titled" by different names. As an example, the Current Unrestricted Fund may be called the General Fund or Current Fund. These titles are given to the fund based upon stipulations such as Board-designated or donor restricted.
What part of mercantilism did bullionism consist of?
The part of mercantilism did bullionism that consisted of both the current account and capital account.
What is a basic balance?
A basic balance is the net balance of the combination of a current account and a capital account in a balance of payments.
Analysis of the types of terms of trade?
the current account and the current account balance are within the terms of trade. if you there is money entering the money supply from a foreign market or someone who has not yet deposited the money into a banking system, that will be a current account. it will be a current account balance, composed of capital account, trade account, and account deficit. this means, if the money is leaving the country.
'What is India's current account balance capital account balance and forex reserves for the period 2001-2006 and list the major features?
data on indias current account balance for period 2001-2006
