Under the fixed capital method, interest on capital was recorded in the Capital Account. In which account should it have been recorded?

Correct answer: Current Account

The governing concept is the distinction between fixed and fluctuating capital methods. Under the fixed capital method, the original capital remains unchanged except for permanent additions or withdrawals. Regular appropriations such as interest on capital, partner salary, commission, and profit share are recorded in the partner's Current Account, not in the fixed Capital Account. Therefore interest on capital should have been credited to the partner's Current Account, making option A correct. A bank account would be relevant only when cash is actually paid, purchases concern goods or inventory, and drawings represent withdrawals by the partner. None of those accounts is the proper place for this appropriation.