Partnership FRA

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:32AM in AAT student discussion
Hello,
Can anyone tell me what is the meaning of this sentence?
Profits accrued evenly during the year.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Partnership FRA

    It means profits for the year will have an equal amount of monthly profits.

    For example finacial year ends in December

    Profits for the end of December amounts to £1560

    therefore profits would be january £130
    February £130 March £130 April £130
    May £130 June £130 July £130
    August £130 Sept £130 Oct £130
    November £130 Dec £130
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Partnership FRA

    thnx i understand dat.
    But in this question it was 2/3 and 1/3 for 1st six months and 1/2 for the next 6 mnths.
    Still the same meaning?
    And i was confused about the word 'accrued' bcoz in 1 question it was for Accural.
    i think it should be accured here.
    what do u think?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Partnership FRA

    Ok it could be a change in the profit sharing ratio
    where when someone leaves, the profit Ratio will change.

    suppose at the begginng there were 3 people x,y,z in the partnership and the profits ratio are
    x 1/3, y 1/3 and Z,1/3.

    Suppose in 7 Months time Y leaves the partnership
    and the new partnership agreement states profits are shared equally.

    Therefore the new Partnership Agreement for the remaining partnership will now be x 1/2 and Z 1/2
    because now there are only two people in the partnership.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Partnership FRA

    It was AAt Specimen exam paper June 2003. U cant find it online.

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Partnership FRA

    but they were only 2 from the begining
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Partnership FRA

    Hi

    the appropriation account is not just used when a partner joins or leaves, it is also used when there is any change in the partnership share out between the existing partners. again profits will be considered to accrued (earned) evenly through the year. Remember the accounting concept - the accruals or matching concept!

    it may be decided that as one is maybe deciding to work less in the partnership - perhaps for reasons outside the partnership that the profitsharing will change, so perhaps from a 50/50 share, the partner doing less work may decide to only take 25% of the profit, and the partner picking up more work to receive 75% profit share in remcompense for his extra work.

    therefore, if the partnership has been operating under 50/50 for the first 8 months of the trading year and the change occurs, the next 4 months should reflect this.

    I used to work for a firm of solicitors and we used to get this, although primarily when a new partner was joining, although we did have a partner leave, and the accounting for that was interesting - just like they detail in the AAT!

    hope this helps, Ruby
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Partnership FRA

    Nzshah.

    It has nothing to do with the matching concept.

    It just means that the profit is the same every month, so you can divide the yearly figure by 12 to find the monthly figure, then multiply this by however months you need.

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Partnership FRA

    hello Scott and every one,
    Thank u so much for ur help.
    I really appreciate that.
    Thnx
    Naureen

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