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Partnership Accounts

  • Fellow PM.Dip
  • Practice Licence
  • 256 posts
  • # 54912

Hi All,

I'm studying to do level 3, I just can't get my head around partnership accounts, in particular the appropriation account, is this included on a trial balance as "appropriation account" or do the figures from this account go into the partners current accounts? Help! Embarassed

  • Fellow PM.Dip
  • Practice Licence
  • 115 posts
  • # 54914

I think the appropriation account is a way of dealing with the net profit. It is an extension of the P&L rather than a seperate acccount.

So it starts with P&L Net profit then deducts interest on drawings and capital -which are posted to the partner current accounts, then partners salaries so you are left with a balance of profit to be shared amongst the partners, which is divided up according the profit sharing agreement and then posted to the relevant partner current accounts.

  • Fellow PM.Dip
  • Practice Licence
  • 256 posts
  • # 54925

Hi Mikeee,

You've explained it so clearly, thanks! As I understand it, the appropriation account should always be zero?

  • Fellow PM.Dip
  • Practice Licence
  • 115 posts
  • # 54932

Hi Lady M

I don't think I was that clear - it debits interest on drawings to the partners current accounts and credits interest on capital and salaries. The remainder is net profit to be shared amongst the partners.

  • Fellow PM.Dip
  • Practice Licence
  • 256 posts
  • # 54987

Hi Mikeee,

I thought what you said was clear! But that's probably because I've read the book about 3 times...Thanks for explaining Smile

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