In partnership accounting, the Fixed Capital Method requires maintaining two separate accounts for each partner.
Capital Account remains fixed and shows only the following:
- Initial capital introduced
- Additional capital introduced
- Capital withdrawn permanently
All other transactions and adjustments are recorded in the Current Account, which includes:
- Interest on capital
- Interest on drawings
- Partner's salary/commission
- Share of profit or loss
- Drawings for personal use
This separation ensures that the capital balance remains constant unless there is a permanent change in capital contribution.
Balance Sheet is a financial statement, not an account maintained in the books. Revaluation Account is prepared only during specific events like admission, retirement, or death of a partner, not as a regular feature of the fixed capital method.
Therefore, Option 3: Capital account and Current account is correct.