Partnership accounts

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Do you think this is enough for partnership accounts:-<BR><BR>Apropriation account (NP-salaries-int on cap = profit to share)<BR><BR>Current acct - Dr Drawings and int on drawings - Cr salaries, int on cap, profit to share)<BR><BR>Intro of new partner (Cr cap acct with introduced capial, Cr captil with Goodwill under old Profit sharing ratio and Dr Goodwill under new profit sharing ratio)<BR><BR>Retirement of partner (bring accross balance on retiring partners current acct, Cr capital with goodwill under old PSR, Dr Bank with balance to pay retiring partner, Dr Goodwill under new profit sharing ratio.<BR><BR>I struggle on this the most, hope it is not to much of a hard question on partnerships<BR><BR>Good Luck to you all

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Partnership accounts

    I think that all sounds ok, the below is from another post:<BR><BR>To retire a partner move their current account balance on to their capital account.<BR><BR>Then recognise goodwill by debiting goodwill account and crediting the partners capital accounts with the goodwill value in the current profit share ratio.<BR><BR>Total the retiring partners capital account, this is the total owed to them by the business.<BR><BR>Then debit his account with amount paid to him and credit bank.<BR><BR>(If there is not enough money in the bank you may need to debit the capital account and credit a creditors account as he becomes a creditor of the business.)<BR><BR>Then eliminate goodwill from the accounts by debiting to the existing partners in the new profit share ratio. (and credit goodwill)<BR><BR>Effectively the existing partners have been charged for the retiring partners goodwill.<BR><BR>When introducing a partner you record goodwill in the existing capital accounts in existing ratio (dr goodwill cr capital a/c's), then add new partners capital, then eliminate goodwill again in new profit share (cr goodwill dr capital a/c's).<BR><BR>Hope this helps!<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Partnership accounts

    Thanks - I saw that one earlier and found it very useful as I couldn't find anything on my notes about retiring a partner, glad I have got it my brain now.<BR><BR>Thanks agains
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Partnership accounts

    HI <BR><BR>HAVE JUST GOT HOME FROM EXAM - FAILED MISERABLY I THINK - <BR><BR>GOODWILL - I DONE THE OPPOSITE WILL I GET AWAY WITH IT AS BELOW:<BR><BR>CR - 50,000 + 50,OOO<BR><BR>DR 40,000, 30,000,30,000<BR><BR>AGHHHH

Categories

Privacy Policy