Capital Account Statement
The capital account records the owner's stake in the business. For a proprietor there is one account; a partnership keeps one for each partner. The statement reconciles the opening balance to the closing balance that appears in the Balance Sheet under Owner's Funds, and is frequently asked for by banks and the income-tax department (Schedule BS of ITR-3 requires proprietor's capital movement).
Formula
Closing capital = Opening capital + Capital introduced + Salary/remuneration + Interest on capital + Share of profit (− share of loss) − Drawings − Interest on drawings.
Fixed vs fluctuating capital
- Fluctuating method: one account per partner; all items pass through it, so the balance changes every year. Default for most firms.
- Fixed method: the Capital A/c changes only for capital introduced or withdrawn permanently; salary, interest, profit and drawings pass through a separate Current A/c. This tool shows both accounts when you select the fixed method.
How this tool works
Enter each partner (or the sole proprietor) with opening capital, additions, salary, interest on capital, share of profit, drawings and interest on drawings. The closing balance is computed per partner; a columnar statement in the standard format is previewed and can be downloaded as a landscape PDF or Excel. Summary cards show total opening and closing capital, drawings and profit credited, and any partner whose capital has turned negative (overdrawn) is highlighted.
Worked example
Bhavna: opening ₹10,00,000; introduced ₹2,00,000; salary ₹3,00,000; interest on capital ₹1,20,000; share of profit ₹3,00,000; drawings ₹1,80,000. Closing capital = 10,00,000 + 2,00,000 + 3,00,000 + 1,20,000 + 3,00,000 − 1,80,000 = ₹17,40,000. Under the fixed method her Capital A/c would show ₹12,00,000 and her Current A/c ₹5,40,000.
Uses
Attach it to the firm's financial statements, use it to compute interest on capital for next year, verify that the total of partners' closing capital equals Owner's Funds in the Balance Sheet, and support the capital figure disclosed in ITR.
Frequently Asked Questions
Where do I get the share of profit figure?
From the Profit & Loss Appropriation Account — the Partnership Profit Sharing Calculator computes it, including salary and interest.
What does a negative closing capital mean?
The partner has withdrawn more than their entitlement; the account shows a debit balance and appears on the asset side (or as a deduction) until made good.
Which method should we choose?
Fluctuating is simpler and most common. Choose fixed if the deed says capital is fixed and interest is to be calculated on the fixed amount.
Can I use it for a sole proprietor?
Yes — enter one row; the heading automatically changes to Proprietor's Capital Account.
Disclaimer: This tool is for general information and estimation only. Tax rates and rules change — verify with official sources or a professional before acting. Read full disclaimer.