Creating partnership accounts(layouts) Flashcards
How will the income statement look for a partnership?
Will be the same as a sole trader down to profit for the year this will then form the start of the appropriation account
What is the use of the appropriation account?
Workout how much profit will be allocated to each partner
What conditions are laid out by the partnership act?
Loans to partnership receive 5% interest
No interest charged on drawings
No interest on capital
Partners not entitled to a salary
Profits and losses shared equally
What is the layout of the appropriation account?
Appropriation account
Profit for the year. X
Add: interest on drawings
Partner A
Partner B
Less: interest on capital
Partner A
parter B
Less: salaries
Partner A
partner B
Equals: Remaining profit share (should be equal to total shared profit and double underlined)
Share of profit
Partner A
Partner B
Total shared profit
What will a partnership capital account look like?
Debit= Bal b/d (owe business), G/will written off, loss on revaluation, capital w/drawn
Credit= bal b/d, G/will created, profit on revaluation, capital introduced
What adjustments will be made to a partners current account?
Debit= interest on drawings (if agreed), share of losses (profit sharing ratio), Drawings
Credit= interest on capital (if agreed), profit share (Profit share ratio), interest on loans to partnership, partners salaries
What is the layout for the bottom of a partnership SFP?
Financed by
Capital accounts
A. X
B. X
X
Current accounts A. B
Opening balance X. X
+ Salary. – X
+ interest on capital. X. X
+Share of profit. X. X
X. X
— drawings X. X
— Goods own use. X. X
Closing balance. X. X
X
What will the goodwill account look like?
Debit= Goodwill created
Credit= Goodwill written off
How do you establish a loss or profit on the revaluation?
Loss= Credit bal carried down will be split using P/share ratio
Profit- credit bal carried down will be split using P/share ratio
