PARTNERSHIP ACCOUNTS 1

Partnership Agreement

To protect each partner in the event of a disagreement.

It will normally include:-

-          the amount of fixed capital each partner contributes

-          interest on capital

-          interest on drawings

-          salary to partners

-          profit sharing ratio

 

If no partnership agreement is in existence

Section 24 of Partnership Act 1890 will apply:-

-          no partner will receive salary

-          no interest on capital and drawings

-          profits and losses will be shared equally between the partners

-          any loans to the partnership by partners will attract an interest rate of 5% per annum

 

Interest on drawings

Is added to the partnership profit.

 

Salaries & interest on capital

Is to be shown in the partnership appropriation account.

 

Interest on partners’ loans to the partnership

Is an expense in the Profit & Loss Account.

 

Partnership Appropriation Account

The purpose of this account is to show the sharing of the profits or losses among the partners.

 

	FORMAT
					RM		RM
	Net Profit						xxx

	Add: Drawings						xxx
							xxx
	Less: Int on capital : Partner A				xxx
	Partner B				xxx		(xxx)
	Less: Salary to Partner B						(xxx)
							xxx
	Profit/(Loss) Share : Partner A				xxx
	Partner B				xxx		xxx

 

 

               

 

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THIS IS TO PROVIDE STUDENTS A COURTESY REMINDER THAT THIS BLOG IS CATERED

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