Question

What are the reasons for keeping separate capital and current accounts for each partner?

Answer 1

1. A separate Capital and Current Account for each partner is opened to ensure that the capital remains intact and is not withdrawn frequently.
2. It helps in the easy calculation of interest on capital.
3. It also facilitates the calculation of interest on current accounts.
4. Further, it separately shows the effect of a partner’s personal entitlements and drawings from the business.