Prepare partners’ capital and current accounts
Record long-term capital separately from annual profit allocations, drawings and other current-account movements.
Exam scope and assessment notes
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. These original lessons cover objective 1.5.3: partnership statements and appropriation, capital and current accounts, agreements and the stated Partnership Act 1890 defaults. Partnership accounting after a change of partners is A Level Topic 3.1.2 and is not covered here. Practice is self-checked, not an official Cambridge grade; full timed-paper practice and human subject-teacher review remain outstanding.
Before you begin
- Use the Topic 1.2 double-entry system and Topic 1.5.1 adjustments. Keep business profit separate from the partners’ appropriation of that profit and from cash drawings.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
A partner introduces an additional permanent $5,000 under the fixed-capital method. Which account changes?
What you will learn
- Explain fixed and fluctuating capital-account systems
- Post appropriations and drawings to the correct partner account
- Calculate closing capital and current-account balances
Fixed capital keeps two records per partner
Under the fixed-capital method, each partner’s capital account records the agreed long-term capital, and changes to that capital are posted only when capital is introduced or permanently withdrawn. A separate current account records annual profit appropriations, drawings and similar movements.
A credit current-account balance increases the partner’s equity; a debit balance reduces it. In the statement of financial position, show partners’ capital and current accounts in the equity section, with debit current balances deducted. The accounts belong to the partners, but they are not external liabilities like trade payables.
Fluctuating capital combines movements
If the partnership uses fluctuating capital accounts, profit shares, salaries, interest, drawings and capital changes may all be recorded in one capital account for each partner. Follow the method specified in the question and do not post the same movement to both a capital and current account.
A partner’s salary or interest on capital is a credit in that partner’s current account under a fixed-capital system. Drawings and agreed interest on drawings are debits. A partner’s share of residual profit is a credit; a share of loss is a debit.
Pause and explain
A partner begins with a $1,200 debit current account, receives $6,000 appropriation credits and makes drawings of $3,500. What is the closing balance before any other item?
Worked example
A and B use fixed capital accounts of $50,000 and $30,000. A’s opening current account is $4,000 credit; B’s is $2,000 debit. Their appropriation credits are $30,500 for A and $21,000 for B. Drawings are $10,000 and $9,000, and agreed interest on drawings is $1,000 and $500. Find closing current accounts and total equity.
Show the worked solution
- A closing current account = 4,000 + 30,500 − 10,000 − 1,000 = $23,500 credit.
- B closing current account = −2,000 + 21,000 − 9,000 − 500 = $9,500 credit.
- Total equity = capital 80,000 + current balances 23,500 + 9,500 = $113,000.
- Check that each partner’s opening debit or credit sign is carried through correctly.
Answer A has a $23,500 credit current account and B a $9,500 credit current account. Together with fixed capital of $80,000, partnership equity is $113,000.
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Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A partner’s fixed capital is $40,000. Opening current account is $2,500 credit; salary and profit-share credits total $11,000; drawings are $7,200; interest on drawings is $300. Calculate closing current account and equity attributable to the partner.
Give me a hint
Keep the fixed capital unchanged and calculate current account separately.
Compare my reasoning
- Current-account closing = 2,500 + 11,000 − 7,200 − 300 = $6,000 credit.
- The fixed capital balance remains $40,000.
- Total equity attributable to this partner = 40,000 + 6,000 = $46,000.
The current account closes at $6,000 credit; total equity attributable to the partner is $46,000.
Look for these in your work
- Current-account postings signed correctly
- Fixed capital kept unchanged
- Partner equity total correct
A partnership has fixed capital of $25,000 for each of two partners. Current accounts are $3,000 credit and $1,500 debit. Calculate total partnership equity shown for these three balances.
Give me a hint
Add capital and credit current balances, then deduct the debit balance.
Compare my reasoning
- Capital total = 25,000 + 25,000 = $50,000.
- Net current accounts = 3,000 − 1,500 = $1,500 credit.
- Total equity = 50,000 + 1,500 = $51,500.
Total partnership equity is $51,500.
Look for these in your work
- Capital total correct
- Debit balance deducted
- Equity total correct
A partner’s current account is overdrawn at year end. Does that automatically mean the partner must repay a short-term external loan? Explain how it should appear in the partnership statement of financial position.
Give me a hint
Distinguish a debit balance within owners’ equity from a liability owed to a lender.
Compare my reasoning
- An overdrawn current account is a debit partner-equity balance.
- It reduces the partner’s net equity in the partnership.
- Present it as a deduction from partners’ capital/current accounts; do not relabel it as an external loan unless a separate loan exists.
The debit current-account balance reduces the partner’s equity. It is not automatically an external loan; show it as a deduction within the partners’ equity presentation unless separate evidence establishes a loan liability.
Look for these in your work
- Debit balance classified
- Equity effect stated
- External loan distinction preserved
Common mistakes
- Putting annual profit shares into fixed capital accounts
- Treating drawings as a partnership expense
- Showing a debit current account as positive equity
What can you explain now?
With fixed capital accounts, where are a partner’s drawings normally recorded?
Compare with the explanation
In the partner’s current account
The agreed permanent capital balance remains fixed; drawings reduce the current account.
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Make it stick
State what goes into a fixed capital account and what goes into a current account.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.