Partners’ capital accounts
Partners’ capital accounts record each partner’s capital interest. Under a fixed-capital system, they normally record capital introduced or permanently withdrawn, with drawings and profit appropriations recorded in separate current accounts. Under a fluctuating-capital system, those other movements also pass through capital accounts. Identify the system before preparing the entries; capital is an ownership interest rather than an external liability.
Worked example
A contributes $20,000 cash to increase permanent capital: debit bank $20,000 and credit A’s capital account $20,000. Under fixed capital, A’s annual profit allocation goes to A’s current account.
Common mistake
A partner’s current-account credit is not automatically a trade payable, and a capital contribution is not revenue.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | K1 | Direct | July 2027–August 2028 |
Related terms
Also called: Partner capital account