Accounts for Partnerships

Question 1

In the partnership appropriation account what is added back into the pot and what is taken away to arrive at the residual profit for distribution?

Answer 1

Add: Interest on drawings
Less: Annual Salaries, Commission, Interest on capital etc

Question 2

Steps to completing the partnership appropriation account and working out the residual profit?

Answer 2

Step 1: Identify the profit/loss for the year and put this figure in the corresponding box
Step 2: Allocate or charge the following items where relevant - Salaries - Interest on capital - Commision, +Interest on drawings
Step 3: Take away or add on these charges to the profit for appropriation
Step 4: Allocate the share of resiudal profit or loss according to the profit sharing ratio

Question 3

What is a current account?

Answer 3

Each partner will have a current account used to record their day to day transactions. Things included in the current accounts are: Salray, Commission, Interest on capital, drawings, share of P or L and the balance b/d and balance c/d will be included.

This is showed what is owed to the partner and therefore a liability account.

Question 4

Name some Dr and Cr for current accounts?

Answer 4

Dr - interest on drawings, drawings
Cr - Salaries, commission, interest on capital and profit

Question 5

When producing a current account what should you make sure to check?

Answer 5

Check to see if there is a current account balance. As the profit will be shared in a ratio in the question however you will have to add the current account balance ontop of that.

Question 6

What is a Capital Account?

Answer 6

Used to record the cpaital each partner has invested into the partnership, the balances remain pretty static unless any investment is made.
A liability account

Question 7

If an owner put investment into a capital account which side would ‘Bank’ go?

Answer 7

Credit - liability account

Question 8

How does the financing section in the partnership statement of financial position vary from the sole traders version?

Answer 8

Sole traders include Opening capital, Drawings, Profit or Loss and Closing Capital.

Partnerships include the balances on the current and capital accounts

Question 9

If the partner owes money to the business which side of the current account will be the balance b/d be on?

Answer 9

debit balance

Question 10

Which account is used to distribute the profit between partners?

Answer 10

Appropriation account

Question 11

Which account shows the balance of profit that each partner has retained within the partnership?

Answer 11

Current

Question 12

What is the double entry for drawings maybe by a partner from the business bank account?

Answer 12

Debit - Current Account
Cr - Bank