Fixed capital system
A fixed-capital system separates partners’ long-term capital contributions from routine movements. Capital accounts change for permanent capital introduced or withdrawn and other specific capital adjustments, while current accounts record profit appropriations and drawings. This separation makes it easier to see each partner’s agreed capital and unsettled annual allocations. Fixed does not mean the capital balance can never change.
Worked example
A begins with $40,000 fixed capital and has $7,000 profit allocation and $5,000 drawings. Capital remains $40,000; the net $2,000 movement goes to A’s current account.
Common mistake
Do not post every profit share to fixed capital when separate current accounts are maintained.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | K1 | Supporting | July 2027–August 2028 |
Related terms
Also called: Fixed partnership capital