Chapter 11 - Partnership Accounts

Question 1

What does a partnership p&l have that a sole trader p&l doesn’t?

Answer 1

• appropriation statement

Question 2

What is the purpose of the appropriation statement

Answer 2

• divided net profit between partners according to rules laid down in partnership agreement

In a sole trader all of the net profit belongs to the owner

Question 3

Describe the bottom half of the b/s for a partnership

Answer 3

Financed by:
Partners capital accounts
Partners current accounts

Proprietors funds is the total

Should still equal top half, I.e net assets

Question 4

What does the total of a partners current and capital accounts represent?

Answer 4

• amount partner had invested in the partnership

Question 5

What is shown in the capital account

Answer 5

• original capital introduced and any subsequent capital introductions
• fixed capital health with this way as it represents amount partner cannot withdraw until they leave the partnership

Question 6

What is shown in the partners current account?

Answer 6

• partners share of profit (comes from appropriation statement)
• any drawings made by partner
• represents amount partner can withdraw from the business at any time

Question 7

Describe tax implications of partnerships

Answer 7

• share of a partnerships profit is taxed on the individual partners rather than on the partnership
• salaries and interest taxed as trad profits