Partnership Accounts

A partnership business prepares

• Income statement

• Financial statement

• Profit & Loss Appropriation Account

• All 3

Residual profit or Divisible profit means

• Net profit

• Profit distributed among partners

• Gross profit

• Net Profit plus drawings

Advantage of parnership business are

• Risk and responsibility are shared

• Additional finance is available

• Additional knowledge and skill

• All 3

Disadvantage of Parnership are

• Profit is shared

• Disagreement between partners

• Longer time spent on decision making

• All 3

Partnership agreement states

• the amount of capital invested

• Profit sharing ratio

• Partners salary

• Interest on capital, drawings and loan

• All

Interest on loan from Partner is debited to

• Income statement

• Profit & loss Appropriation Account

• Partner's Capital account

• Statement of Financial Statement

Current Account does not include

• Interest on drawings & capital

• Partners salary

• Interest on loan when not paid

• Share of profit /loss

• Capital invested by partners

A debit balance in Current Account implies

• Money owed by the firm to partners

• Money owed by partners to the firm

• Money owed by one partner to another

• Money owed by the firm to government

What discourages partners to withdraw money from the firm

• Partner's salary

• Interest on capital

• Interest on drawings

• Interest on loan

Advantage of maintaing both capital and current account for each partner

• Easy to see the amount invested and calculate interest

• Easy to see whether drawings exceed the total profit share

• Easy to calculate partners salary

• Easy to claculate interest on drawings