Chapter 13 Flashcards
What are salaries in Partnerships?
Salaries may be awarded to partners who take on extra responsibility
What is Interest on Capital for Partnerships?
May be provided at a set percentage to reflect the differing amounts of capital invested.
What is the Profit Share Ratio (PSR) in Partnerships?
The ratio in which any remains profits should be shared amongst the partners after they have been allocated salaries, interest on Capital and interest on drawings.
How should profits be shared if there is no partnership agreement?
No partner should receive a salary
No interest on capital should be allowed
Profits should be shared equally between the partners
What is an appropriation statement?
An extra statement which is required in which the profit from the P&L is shared between the partners
Where do the profits go?
The profits are allocated to each partner and are credited to the partner’s current account. Drawings are also recorded in this account
What is the partners capital account?
It records the initial capital invested in the business by each partner. Ie the injection/drawing of capital by a partner.
