CHAPTER 19

PARTNERSHIP
ACCOUNTS
 A partnership is a business in
which two or more people work
together as owners with a view to
making profits. Normally, there
cannot be more than 20 partners
in a business.
 Advantages

- more capital introduced to business

- more expertise available
- responsibilities are shared e.g. holidays, sickness
- risk is shared
- losses are shared
- discussions can take place before decisions are taken
 Disadvantages

- profits must be shared

- decision making may be more difficult
- disagreements may occur
- One partner’s actions can bind the other partners
- All partners are responsible for the debts of the business
 The reason
why it is
helpful for a
partnership
agreement to
be prepared
🡺 To avoid misunderstandings
and disagreements in the future
 - Interest on capital – to
reward partners who invest
The reasons more, to encourage to
why each of the invest more
- Interest on drawings – to
following might discourage drawings, to
penalise for making more
be included in a drawings
- Salary -- to compensate for
partnership extra workload, to reward
agreement . for extra skills
 At the end of financial year an
income statement and a statement
of financial position are prepared.
However, a partnership will
prepare an extra account after the
income statement, known as
APPROPRIATION ACCOUNT
EXAMPLE 1
EXAMPLE 2
 Shahid Hussain and Hamza Hussein
Appropriation Account for the year ended 31 Agust 2011

Profit for the year Interest on Drawing 27.960

Interest on Drawings Shahid 3% x 10.000 300
Hamza 3% x 8000 240
28.500
Interest on Capital Shahid 5% x 80.000 4000
Hamza 5% x 60.000 3000
Salary Shahid 9000
16.000
Residual profit 12.500
Profit Share Shahid 6250
Hamza 6250
12.500
12500 / 2 = 6250
 Example 3
Ben and Tom Panesar formed a partnership on 1 February 2014. The following information is
available.
1. On 1 February 2014 Ben contributed $90 000 capital and Tom contributed $60 000.
On 1 August 2014 Ben contributed a further $10 000 capital.
Interest on capital is allowed at the rate of 3% per annum.
2. Tom was to be entitled to an annual salary of $9000 per annum for the first four months of the
first financial year. After that date the salary was to increase to $12 000 per annum.
3. During the year ended 31 January 2015 Ben’s drawings amounted to $9800 and Tom’s
drawings amounted to $20 800.
4. Interest on drawings for the year ended 31 January 2015 amounted to $490 for Ben and $1040
for Tom.
5. Profits and losses are shared 2/3 to Ben and 1/3 to Tom.
6. On 1 February 2014 Tom made a loan of $15 000 to the business. The loan is repayable on 31
January 2020. Loan interest of 4% per annum is to be credited to Tom’s current account.
7. The profit for the year ended 31 January 2015 (after loan interest) was $27 920.
REQUIRED
(a) Prepare the profit and loss appropriation account for the year ended 31 January 2015. See next
page.
(b) Prepare partner’s account at 31 Januari 2015
a)
Ben and Jane Mwanga are in partnership.
They have agreed the following:
Interest is to be allowed on capital at 6% per annum
Interest is to be charged on drawings at 4% per annum
Jane is to receive an annual salary of $10 000
Profits and losses are to be shared in proportion to their capitals
Ben would invest $50 000 and Jane would invest $30 000 as capital

the year ended 31 March 2010, the partnership earned a profit for the year (net profit) of $12 000.
Drawings during the year ended 31 March 2010 were:
$
Ben Mwanga 8 000 x 4% = 320
Jane Mwanga 15 000 x 4% = 600
Capital
Ben Mwanga 50.000 x 6% = 3000
Jane Mwanga 30.000 x 6% = 1800
Share loss
Ben Mwanga 50/80 x 1880 = 1175
Jane Mwanga 30/80 x 1880 = 705
a)
 Current Account
Ben Jane Ben Jane
$ $ $ $
2010 Mar 30 Bal b/d
Bal b/d 5000
interst on
2010 Mar 30 Drawing 8000 15000 2010 Mar 30 Capital 3000 1800
Interest On
Drawing 320 600 Salary 10000
Interest on
Loss Share -1175 -705 Loan
495
Bal c/d 6495 bal c/d 3000 16.800

1825 15600
 Case 1
Samuel and Martha Mavuso
a) To compensate for the fact that she does more work than Samuel.
Or
To recognise the work that she does in the partnership.
THANK
YOU!
Do you have any questions?

CREDITS: This presentation template was created by

Slidesgo, including icons by Flaticon and infographics
& images by Freepik
CREDITS: This presentation template was created by
Slidesgo, including icons by Flaticon and infographics
& images by Freepik
 RESOURCES
Did you like the resources on this
template? Get them for free at our
other websites:

PHOTOS
● Cute woman jumping isolated on blue w
ith copy space
● Cute woman jumping isolated on blue
● Portrait of modern man in a caffe
● Smiley pregnant woman at home with m
ug of coffee
● Portrait young businesswoman with tabl
et
VECTORS
● Hand drawn funny sticker collection
● Hand drawn funny sticker collection
● Hand-drawn funny sticker collection
● Hand-drawn funny sticker collection
● Funny sticker drawings pack
● Hand drawn funny sticker collection
 Instructions for use
In order to use this template, you must credit Slidesgo by keeping the Thanks slide.

You are allowed to:

- Modify this template.
- Use it for both personal and commercial projects.

You are not allowed to:

- Sublicense, sell or rent any of Slidesgo Content (or a modified version of Slidesgo Content).
- Distribute Slidesgo Content unless it has been expressly authorized by Slidesgo.
- Include Slidesgo Content in an online or offline database or file.
- Offer Slidesgo templates (or modified versions of Slidesgo templates) for download.
- Acquire the copyright of Slidesgo Content.

For more information about editing slides, please read our FAQs or visit Slidesgo School:
https://slidesgo.com/faqs and https://slidesgo.com/slidesgo-school
 Fonts & colors used
This presentation has been made using the following fonts:

Timmana
(https://fonts.google.com/specimen/Timmana)

Actor
(https://fonts.google.com/specimen/Actor)

#ffffff #7825d9 #dfdefc #25c3d9 #87f3e1

 Storyset
Create your Story with our illustrated concepts. Choose the style you like the most, edit its colors, pick
the background and layers you want to show and bring them to life with the animator panel! It will boost
your presentation. Check out How it Works.

Pana Amico Bro Rafiki Cuate

 Use our editable graphic resources...
You can easily resize these resources without losing quality. To change the color, just ungroup the resource
and click on the object you want to change. Then, click on the paint bucket and select the color you want.
Group the resource again when you’re done. You can also look for more infographics on Slidesgo.
 JANUARY FEBRUARY MARCH APRIL MAY JUNE

PHASE 1

Task 1

Task 2

PHASE 2

Task 1

Task 2

JANUARY FEBRUARY MARCH APRIL

PHASE
1

Task 1

Task 2