help

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:30AM in AAT student discussion
can someone please explain what goe into the appropriation account for partnerships, i cant get my head around it!<BR>please!<BR>

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  • System
    System Posts: 100,534 🤖 Admin 🤖
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    It is quite simple really. Try not to look too deep into this.<BR>Once you have your profit share you take off the Interest earned on the capital account and then take off the salaries.<BR>You then simply split the remaining profit share by the partners shares ie 60% and 40%.<BR><BR>Hope this helps.
  • System
    System Posts: 100,534 🤖 Admin 🤖
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    I struggle on this as well. I think it is as follows:-<BR><BR>Net Profit from P&L<BR><BR>Add interst from Drawings if applicable<BR><BR>Less Partners Salary<BR><BR>Less Interest on Capital<BR><BR>= New profit to share<BR><BR>You then share share the profits out as stated - sometimes there is two profit sharing ratios to take into account but all of them should add up to the New profit to share<BR><BR>Could someone please clarify if this is correct
  • System
    System Posts: 100,534 🤖 Admin 🤖
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    When you do an appropriation account you don't touch drawings. Drawings is only shown on the actual current account.<BR>Therefore it is Interest on capital accounts and salaries that are deducted before the profit share is completed.
  • System
    System Posts: 100,534 🤖 Admin 🤖
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    You do need to add any interest on drawings to the profit before deducting salary, interest on capital. I've only seen interest on drawings mentioned in one test/exam though.
  • System
    System Posts: 100,534 🤖 Admin 🤖
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    Thanks for that much appreciated - I will make a mental note not to put interest on drawings in.<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
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    In the FTC book, there are specimen questions on Fresh Produce. Here you have to prepare and appropriation account but after 6 months the profit share changes.<BR><BR>They set it out in the answers as two separate appropriation accounts splitting the net profit between the two halves of the year. Whereas I would deduct salaries and interest on capital from the total net profit THEN do profit share for first half of the year and profit share for second half of the year.<BR><BR>Is my way acceptable? It just seems tidier than doing it twice!
  • System
    System Posts: 100,534 🤖 Admin 🤖
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    That's the way I would do it as well.<BR><BR>In one of the exam papers (speciman paper) which I have done they have deducted the interest on capial and salaries from the NP and then did the two profit sharing ratios.
  • System
    System Posts: 100,534 🤖 Admin 🤖
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    Thats good then, thanks! So much of this is not knowing how they want you to set things out, I'm never sure if there is a right and wrong way or whether it is up the individual.<BR><BR>Good Luck All!
  • System
    System Posts: 100,534 🤖 Admin 🤖
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    thank you for all your help, i understand it better know<BR><BR>good luck tomorrow!<BR>

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