Changes In Partnerships

Question 1

Recommend to x whether or not they should introduce y as a new partner

Question 2

Explain the purpose of a partnership capital account

Answer 2

A partner’s capital account tends to be a fixed account (1) which includes the initial investment into the business by each partner (1). This account would then only change with either the introduction of extra capital (1) or due to a change in the structure of the partnership such as a new partner joining (1) an existing partner retiring (1) or the partnership being dissolved (1). These changes could include adjustments for revaluation of non-current (fixed) assets (1), goodwill (1) and realisation profit/loss on a dissolution (1).
Used as a means of calculating interest on capital (1).

Question 3

Explain the purpose of a partnership current account

Answer 3

A current account is a fluctuating account (1) which is used to record the allocation of profit to the partners from the appropriation account (1). These allocations can include partners’ salaries/interest on capital/profit shares/interest on drawings (1) It is then used by the partners for drawings (1).