Partnership Accounts

https://youtu.be/HYsviWWkdK4
 Lesson Objectives

– What are they?

– Advantages and disadvantages
– How is it different from sole-trader?
– Contents of a partnership agreement
– Formats : Appropriation and current account
– Difference between capital and current accounts
Partnership

What are they?

■ A form of business ownership
where two or more individuals
work together with the intention
of making a profit.
■ Examples:
- Accountants
- Solicitors
- Dentists
Advantages and disadvantages
How is it different from sole-trader

Partnership

1.Different amount
of capital from 3.Working and
each partner sleeping partners

3. salaries to working partners

1. Interest on capital 2. Different amount
of drawing by
partners

2. Interest on drawings

Then how do you make sure that each partner

gets a fair treatment?
Purpose of Appropriation Account

■ The trading and profit and loss account

would be prepared in the same way as a
sole trader.
■ However, a partnership company has an
additional section shown in the profit and
loss account
■ This section is known as the appropriation
account
■ The account shows the distribution of
profit or loss to each partner
Contents of a partnership deed

– Name and address of Firm and all

partners.
– Nature and place of business
– Amount of capital invested by each
partner.
– Profit and loss ratio.
– Rate of interest on partner’s capital
and partners drawings if any.
– Partner’s salary and commission if
any etc
Accounts prepared for a
Partnership

1. Income Statement(Trading and profit

and loss account)
2. Profit and loss appropriation account
3. Current accounts
4. Capital accounts
5. Statement of Financial Position
(Balance sheet)