11: Partnership accounts

Question 1

In a partnership, what is located at the bottom of the profit and loss account?

Answer 1

Appropriation statement

Question 2

What are the two double entries for allocating the profit for the individual partners from the pnl to the B/S and any drawings

Answer 2

To allocate the profit for the period to the individual partners:

Dr profit and loss a/c
Cr Partner’s current accounts

Any drawings taken out of the business by the partners:

Cr Bank
Dr Partner’s current accounts

Question 3

Are partner salaries an expense on the balance sheet as “Wages”?

Answer 3

No, the salary of a partner is not an expense of the business as it relates to the owners.

Question 4

What makes up the appropriation statement? (Calculation)

Answer 4

Profits - Salary - Interest on period - PSR (Profit Sharing Ratio) = Total profit share

Question 5

What does PSR stand for?

Answer 5

Profit Sharing Ratio

Question 6

What is the order of the totals for the appropriation statement?

Answer 6

Profit for period
Less: Salary
Less: Interest on period

Question 7

Identify whether this statement is true or false:

• Interest on fixed capital contributed is an expense in the profit and loss account of the partnership.

Answer 7

False - Interest from capital is deducted from total profit (in appropriation statement)