chapter 28: income statement, current accounts, statement of financial position

Question 1

differentiate between fixed and capital accounts

Answer 1

fixed accounts: remains the same each year, usually consiting of the initial capital contribution of each partner
fluctuating capital accounts: is updated every year with the entries that should have been entered in the current account

Question 2

what is the importance of the current accounts of the partners?

Answer 2

• it shows the monetary interest of the partners in the business.

Question 3

what is recorded on the credit side of the current account?

think: BIISA

Answer 3

-** balance b/d** (then the partnership owes the partner)
-** interest on capital** (compensation of the capital invested)
- interest on loan (interest to partner for loans provided to partnership)
-** salary **(money paid to partner to compensate skill and time devoted)
- appropriantion: share of profit (money due to partner from division of residual profit)

anything that increases the interest of the owner in the partnership

Question 4

list the entries on the debit side of the current account

think: BIDA

LAST ONE. LOOK AT PAGE 377 FOR INCOME STATEMENT

Answer 4

• balance b/d(indicates that the partner owes the partnership)
• interest on drawings ( interest charged by partnership for yearly drawings)
  -** drawings** (money/assets taken for personal use; decreases interest of the owner)
• appropriation: share of loss (money charged on partner by partnership from division of residual loss)

anything that decreases the interest of the owner in the partnership