Archive about 'Partnership Accounts'
In a partnership, when interest is paid on loan to the partner, is it an appropriation of profit or not?
Tweet Earlier article described how a loan can occur in a partnership. Interest on loans from a partner is accounted for as an EXPENSE in the Profit & loss account and NOT as an appropriation of profit even though the interest is added to the current account of the partners.
In a partnership, explain situations where a loan can occur
Tweet In the event an existing or previous partner make a loan to the partnership, he or she becomes a creditor to the partnership. Some reasons for such loans being made are: Partnership is short of cash and the existing partners are not willing to contribute further any capital New partnership is not able to […]
What are the differences between a partner’s current account and his capital account?
Tweet The main differences are: The balance on the capital account normally remains static from year to year Whereas: The current account is continually fluctuating up and down as a result of the partnership making a profit or loss, partner taking out their drawing and interest on capital
In a partnership, explain what is “Joint and several “ liability.
Tweet In a partnership, it is usual for each partner to accept full liability for the debts of the partnership. In the event that one partner is unable to pay his share of the debts in full, the other partner must take on the balance himself as his own personal liability. This is known as […]
What are the Accounting Entries at the END of the FINANCIAL YEAR of a partnership?
Tweet Tabulate below the usual accounting entries for accounting for partnership:- Debit Credit SALARY Appropriation Account Partners’ Current Account INTEREST ON CAPITAL Appropriation Account Partners’ Current Account INTEREST ON DRAWINGS Partners’ Current Account Appropriation Account SHARE OF PROFIT Appropriation Account Partners’ Current Account SHARE OF LOSS Partners’ Current Account Appropriation Account DRAWINGS Partners’ Current Account […]
Explain some difference in accounting for partnership and accounting for sole trade or sole proprietor?
Tweet Major differences are: The funds put into the business by each partner are shown differently The net profit must be appropriated by the partners, ie. Shared out according to the partnership agreement. These appropriation s of profit must be shown in the partnership accounts.
In a partnership, how to deal with Guaranteed share of profit
Tweet When the amount of a partner’s share of profit is guaranteed by the other partners and when his or her actual share of profit amounts to LESS than the amount guaranteed, we should: Step 1: Debit: Appropriation account with the guaranteed amount Credit: Partner’s Current Account Step 2: Any remaining profits will then be […]
In partnership accounting, how do we calculate and take up into the books of account INTEREST ON DRAWINGS
Tweet Interest is imposed on drawings in excess of normal requirement to discourage excessive and unhealthy withdrawal of vital funds in a partnership. How to compute or calculate interest on drawing: Interest is calculated FROM the date the amount is withdrawn TO the end of the financial year. Illustration: A partnership’s year ends on 31 […]
Accounting Quiz or Test Your Accounting Knowledge On Partnership Accounts
Tweet Refresh or test your accounting knowledge on Partnership Accounts : QUESTIONS:1.0 What is “ joint an several liability? 2.0 Describe two ways in which the accounts of a partnership differ from those of a sole trader 3.0 What are the differences between a partner’s current account ad his capital account? 4.0 Interest paid on loans […]
What Is The Reason For Preparing A Profit and Loss Appropriation Account/Statement For A Partnership and Why Not For a Sole Proprietorship.
Tweet Why do I need to prepare the Profit & Loss Appropriation for a partnership which is not required under a sole proprietorship organization:Answer: Compared to a partnership there is no necessity to prepare a profit and loss appropriation account as the profit and loss appropriation account is basically to set up the SHARE OUT of […]