Partnerships Help!!

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:30AM in AAT student discussion
Hi I'm new to the forum. Could anyone enlighten me on what I need to know for Partnerships, i.e. Appropriation Account and Current/Capital accounts. To be honest this area is an area I haven't got a clue in, and can't seem to understand what is going on. If anyone can help me with regards information, and layouts of the above I'd be extremely grateful!!<BR><BR>Thanks<BR><BR>John

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Partnerships Help!!

    Hi John<BR><BR>There are five steps which go into an appropriation account and its as follows <BR><BR>Net Profit<BR>Less Interest on loan<BR>Add Interest on drawings<BR>Less salaries<BR>Less Interest on Capital<BR>Profit Share<BR><BR>If the steps are not there then you dont need to add them in. the figures get put in the current account with the less figures ie salaries being a Dr and the add figures being a Cr.<BR><BR>The only areas where the capital account needs to be changed is if there is new capital from an assisting partner or a new partner as joined, also for goodwill and if there has been a revaluation.<BR><BR>I hope I have helped you <BR><BR>Kay <BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Partnerships Help!!

    John, l believe Key has given you some guide about Partnership appropriation account, It is very easy!<BR>Appropriation means how the business profit / loss was shared between the partners.<BR>Look for the followings -<BR><BR>Net Profit (from P & L acc.) £ XXXX<BR>add interest on drawings if any £XXX<BR>Less: Interest on Capital XXXX<BR>Less: Salary (if any) XXX<BR>The balance is shared between the partners according to their profit sharing ratio.<BR><BR>Note:<BR>In the current accounts - remember the partners' balance b/f; it could be Dr, or Cr.<BR>Credit - all income accrued to each partners eg; each partners share of profit as above, interest on capital and salaries.<BR>debit - Drawings and interest on drawings<BR>The balance is what is due to each partners in their current account or what each owes.<BR>This balances will help you in the balance sheet ie -<BR>Capital account + current account = Capital employed.<BR><BR>But if there is a change in partnership ie new partner introduced eg; Goodwill will occure.<BR>In the partners capital accounts - Credit their balances and credit the old partner will their share of goodwill @ their old profit sharing ratio.<BR>and credit the new partner will his capital introduced into the business.<BR><BR>In case goodwill is to be excluded from the balance sheet.<BR>You need to debit each partners (including the new partner) with the amount of goodwill written off @ their new profit sharing ratio.<BR><BR>The balance b/d will now represent the capital of each partners' at that date.<BR>Goodluck.<BR>

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