Financial Statements
Partnership
Partnership questions build on sole trader skills and add the appropriation account — splitting profit between partners via salaries, interest on capital, and profit-sharing ratios. Current accounts and capital accounts must both be prepared accurately.
The appropriation account must start with profit for the year, then deduct partner salaries and interest on capital before sharing the remainder in the profit-sharing ratio. Common mistakes: using drawings instead of capital for interest calculations, and forgetting that interest on drawings is added back to profit (not deducted).
Key Concepts to Revise
Appropriation Account
Distributes profit between partners. Deduct salaries and interest on capital, add interest on drawings, then share the remainder in the agreed ratio.
Partners’ Current Accounts
Records each partner’s share of profit, salary, interest on capital (credit) and drawings, interest on drawings (debit). Balance = net amount owed.
Partners’ Capital Accounts
Usually fixed — only change when a partner joins, leaves, or revalues assets. Interest on capital is calculated on these balances.
Partnership SFP
Identical to sole trader SFP except the capital section shows each partner’s capital and current account balance separately.