Partnership AccountsSession 4

Partnership AccountsAims This unit is about the learner being able to prepare final accounts for both sole traders and unlimited partnerships, including the appropriation of profits. Learners will be able to draft final accounts and make necessary adjustments according to current financial standards

Partnership AccountsLearning outcomesBy the end of the sessions all leaners will be able to correctly complete a Statement of Financial Position for a Partnership

Statement of Financial Position

The statement of financial position of a partnership must show the year end balances on each partner’s capital and current account.

The transactions can be shown in summary form.

Statement of financial position

These are shown in the “financed by” section of the statement

All other sections of the statement of financial position are prepared the same as a sole trader.

SFP Example Layout

Financed by

SFP Example Layout

Financed by

Example

Bob and Bill, in partnership Statement of financial position (Extract) as at 31 January 20X4

FINANCED BY Bob Bill Total £ £ £ Capital Accounts 50,000 60,000 110,000 Current Accounts (500) 1,000 500 _________ _________ _______ 49,500 61,000 109,500 ________ ________ _______

Worked example – Len & Fred

Task (a) - Appropriation Account

Financial Year Ending 30th September £

Profit for appropriation 38,000

Salaries

Fred 6,000

Interest on Capital (5%)Len (£33,000 x 5%) 1650Fred (20,000 x 5%) 1000Profit available for distribution 29,350Profit Share (2:1)Len (£29350 / 3 x 2) 19567Fred (£29350 / 3 x 2) 9783

29,350

Worked example – Len & FredCurrent Accounts

Bal b/d 500 Bal b/d 1000

Drawings 17000 14000 Salary 6000

Interest on Capital

1650 1000

Profit Share 19567 9783

Balance c/d 3717 3783

21217 17783 21217 17783

Balance b/d 3717 3783

Len Fred Len Fred

Worked example – Len & Fred

Statement of Financial Position

Non-current assets: Cost Acc Depreciation Carrying value

Motor Vehcles 40000 16000  24000 Fixtures & Fittings 22000 8000 14000

38000Current assets:SLCA 32000  Bank 5000Cash 500Closing Inventory 16000    53500 Current liabilities:  

 PLCA 21000   Loan 10000      31000  Total net assets 60500 Financed by Len Fred TotalCapital Account  33000  20000  53000Current Account 3717 3783  7500Total  36717  23783  60500

Non-current assets: Cost Acc Depreciation Carrying value

Motor Vehcles 40000 16000  24000 Fixtures & Fittings 22000 8000 14000

38000Current assets:SLCA 32000  Bank 5000Cash 500Closing Inventory 16000    53500 Current liabilities:  

 PLCA 21000   Loan 10000      31000  Total net assets 60500 Financed by Len Fred TotalCapital Account  33000  20000  53000Current Account 3717 3783  7500Total  36717  23783  60500

Practice Questions