Partnership Accounts Flashcards
What are the correct journal entries required to record the allocation of profits to partners?
Debt profit and loss account
Credit partners’ current account
What is found in the appropriation statement?
Salary, interest on capital, profit for the period
How are partner’s salaries calculated?
Partner’s salaries are a fixed allocation of profit
What does the addition of the partner’s capital and current account represent?
A partner’s total investment in the partnership
What do partner’s pay income tax on?
Their share of the partnership profits
What statement is used to divide profits between partners?
The appropriation statement
How are partners’ salaries and interest taxed?
As trading profit
How would you increase drawings on the partner’s t account?
Debit drawings, credit profit share
What is the fixed capital amount?
The amount the partner cannot withdraw until the partner leaves the partnership
What are the correct journal entries to record the amounts taken by partners as drawings?
Debit partner’s current account and credit bank
Can partners draw a salary greater than their profit allocation in any year?
Yes
What is used to divide the profits between partners?
The appropriation statement
What impact does drawings have on the partners’ current account?
Debit current account
Where is the rate of interest due on capital contributions and the name of the partnership found?
In the partnership agreement
