Partnership accounts

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Partnership accounts

• Part 6

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A partnership is formed when 2-20 people agree to
form a business. Each partner has unlimited
liability.

• There can be limited partners. Their liability is
  limited.
• They can not take back their capital during the
  partnerships life time.
• They are not allowed to run the business
• There must be at least one general manager.

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Deed of partnership

• A deed of partnership is a legal document signed
  by all partners. It states
• How much capital each partner has contributed
• How much profit / loss each partner will receive
• How much interest they will receive on the
  capital they invested
• How much interests they will be charged on any
  drawings
• How much each partner will be paid

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Deed of partnership

• If no deed of partnership exists, the law states
• Profits losses shared equally
• There is no interest paid on capital
• No interest is charged on drawings
• Salaries are not allowed
• Partners who put a sum of money into a
  partnership in excess of the capital they agreed
  to invest, they are entitled to receive interest
  on that additional capital at a rate of 5

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Fixed Fluctuating accounts
Taylor - Capital
Jan 1 Bank 20,000
Taylor - Capital
Dec 31 Drawings 15,000 Interest on drawings
500 Balance c/d 5,000 20,500
Dec 31 Interest on capital 1,000 Share of
profits 19,500 20,500 Balance b/d 500
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Questions (page 547)