Under the fluctuating capital method, if a partner's share of profit is accidentally omitted from his capital account, what will be the effect on his closing capital?

Correct answer: Closing capital will be understated

Under the fluctuating capital method a partner’s profit share is credited to his capital account, so omitting that credit leaves the closing capital understated. The closest distractor (B) is wrong because omission cannot cause an overstatement — overstatement happens only if an excess credit was posted. To rectify, pass a correcting entry (e.g., debit Profit & Loss Appropriation and credit Partner’s Capital). Exam tip: always trace profit distribution postings (capital vs current accounts) when verifying closing capitals in a trial balance or partners’ ledger.