Fluctuating capital system
A fluctuating-capital system records capital contributions, profit appropriations, drawings and other partner movements in one capital account for each partner. Separate current accounts are not used for those routine movements. The balance therefore changes as profits are allocated and withdrawals made. The combined ownership balance should be consistent with what separate fixed-capital and current accounts would show.
Worked example
Opening capital of $30,000 plus capital introduced $5,000 and profit share $8,000 less drawings $6,000 gives closing capital of $37,000.
Common mistake
Do not add a second current-account balance for movements already included in fluctuating capital.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | K1 | Supporting | July 2027–August 2028 |
Related terms
Also called: Floating capital system