Partnerships
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| Partnership | Group of 2-20 people who are in business together with the common aim of making a profit |
| Partners' current accounts | Account forming part of the financed by section on a balance sheet which records the day to day transactions by the partners |
| Partners' capital accounts | Forms part of the financed by section of the balance sheet and records the capital transaction by the partners |
| Appropriation account | Follows on from the profit and loss account and shows how the profit is divided between the partners |
| Interest on capital | Interest taken from profit and given to the partners to reward them for leaving their money in the business |
| Interest on drawings | Interest taken from the partners' current accounts and added back to the profit to penalise partners if they have taken drawings earlier in the year |
| Profit sharing ratio | Gives a ratio by which partners split the profits. May depend on skills, experience or time in the partnership |
| Salaries | Given to the partners before profits are shared |
| Partnership Act 1890 | Provisions of this are to be used if there is no other partnership agreement in place |
| Goodwill | May be introduced by the partners when there is a change in the partnership to show reputation, customer loyalty etc |
| Revaluation account | Used when assets are revalued when there is to be a change in the partnership |
| Drawings | What the partners take from the partnership. Opposite entry is BANK. |
| Partnerships have unlimited liability. True or false? | True |
| Sole traders have limited liability. True or false? | False |
| Shareholders in limited companies have limited liability. True or false? | True |
| Advantage of partnerships are: | Shared workload, shared skills, share of losses, holiday and sickness cover, extra capital, relatively easy to set up |
| Disadvantages of partnerships are: | Profits are shared, disagreements, unlimited liability |
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