Question

Assertion (A): Under the fluctuating capital method, the balance in the capital account fluctuates from time to time.

Reason (R): Under the fluctuating capital method, all the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings etc, are recorded directly in the capital accounts of the partners.

Options

• (A) is correct but (R) is wrong

• Both (A) and (R) are correct but (R) is not the correct explanation of (A).

• Both (A) and (R) are incorrect.

• Both (A) and (R) are correct and (R) is the correct explanation of (A). 

Answer 1

Both (A) and (R) are correct and (R) is the correct explanation of (A).