The variable capital balances method (method 1), requires the profit or loss and partner's drawings to be closed off to each partner's:
A) capital account.
B) cash account.
C) profit or loss summary account.
D) retained earnings accounts.

Question

Quizplus · Accepted Answer

The variable capital balances method involves closing the profit or loss and partner's drawings to their respective capital accounts. This means that any profits or losses will be allocated to the individual partners' capital accounts based on their percentage ownership, which may be different for each partner. Similarly, any drawings taken by the partners will be deducted from their capital account. As a result, choice A, capital account, is the correct option. Choices B, C, and D are incorrect as they do not relate to the variable capital balances method.

The Variable Capital Balances Method (Method 1), Requires the Profit