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Stack #56159

Partnerships

QuestionAnswer
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
Created by: amandacavanagh
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