partnership accounts

HideShow resource information
View mindmap
  • PARTNERSHIP ACCOUNTS
    • GOODWILL ACCOUNT
      • dr- goodwill created   *use old ratios
        • (cr capital account with goodwill created)
      • cr- goodwill written off *use new ratios
        • (dr capital account with goodwill written off)
      • when a partner leaves a partnership, or is admitted to a partnership, or an old partnership is bought to an end and transferred to a new partnership goodwill accounts are used
        • if goodwill is purchased then it is capitalised and classified as intangible non current asset in the balance sheet - the amount of goodwill should also be depreciated (amortised)
      • goodwill = the amount you can received greater than the value of the assets of the business
    • APPROPRIATION ACCOUNT
      • net profit. +interest on drawings -interest on capital -salaries. residual profit. share of profit.
        • SPLIT YEARS create 2 columns: one for the first part of the year, one for the second part of the year
          • when changes in a partnership occur during the course of the year, the idea of split years is made use of. *as a note, it's assumed that net profit/loss is earned at an equal rate throughout the year
    • CURRENT ACCOUNT
      • cr- interest on capital, profit, salaries
      • dr- drawings, interest on drawings, loss
    • REVALUATION ACCOUNT
      • dr- decrease in value of asset
      • cr- increase in value of asset
      • when assets are revalued, the revaluation account is used
        • the revaluation account is balanced off, and the difference in balance is split between the partners in their profit sharing ratio. these amounts are then transferred to the partners capital accounts
    • REALISATION  ACCOUNT
      • dr- discounts allowed to trade receivables, value of assets, dissolution expenses
        • a dr balance = profit on realisation
      • cr- discounts received from trade payables, realisation of assets
        • a cr balance = loss on realisation
      • when a partnership ends, it goes through the process of dissolution. this can be for many reasons ie partnership fails/disagreements, retirement/death of partners, a new partnership being formed, etc. the accounts of the partnership have to be closed down and this makes use of the realisation account
        • draw up a realisation accounts. draw up a bank account. draw up a capital account.
          • once the accounts have been closed, except the capital accounts, the partners should balance of the capital and bank account by paying in money to the bank or receiving money from the bank. therefore the bank account should balance
        • GARNER V MURRAY RULE. any deficiency on a partners capital account resulting from dissolution, should be shared by the other partners in the ratio of last agreed capitals (the bal b/d on their capital accounts at the end of the last trading year)
          • (own capital  before dissolution / total of all solvent partners capital before dissolution) x deficiency

Comments

No comments have yet been made

Similar Accounting resources:

See all Accounting resources »See all partnerships resources »