Question

When capital is fixed, the capital accounts of partners show:

• A. Debit balance
• B. Credit balance
• C. Profit
• D. Loss

Hint:

Capital = Liability of firm to partners → normally shown on credit side.

Answer 1

The Correct Option is B

Step 1: Fixed capital system.
Under the fixed capital system, capital accounts of partners remain fixed. Adjustments for drawings, interest, and profit/loss are recorded in Current Accounts.
Step 2: Normal balance of capital accounts.
Capital represents amount invested by partners in the firm. It is a liability for the firm, hence capital accounts normally show a credit balance.
Step 3: Conclude.
Therefore, when capital is fixed, partner’s capital accounts show a credit balance.
Final Answer: \[ \boxed{\text{Credit balance}} \]