If the fixed capital balances method (method 2) is used to account for partnership equity, both the profit or loss and the partner's drawings are closed to the:
A) profit or loss summary account.
B) profit distribution account.
C) partners' retained earnings accounts.
D) partners' capital accounts.

Question

Quizplus · Accepted Answer

Under the fixed capital balances method, both the profit or loss and the partner's drawings are closed to the partners' retained earnings accounts, not directly to their capital accounts. This method keeps the capital accounts stable and reflects changes in the retained earnings accounts.

If the Fixed Capital Balances Method (Method 2) Is Used