partnership accounts
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Partnership Accounts
Mr Arthur
Aims of the Lesson
1. Partnerships??
2. Advantages/ Disadvantages of Partnerships
Partnerships?
A partnership is a form of business, where partners share profits
Consists of between 2-20 members No written agreement is required but
agreement is recommended Examples
Accountants Solicitors Dentists
Advantages/Disadvantages of Partnerships
Advantages Easy to form, no legal
formalities Partners can combine
expertise Combine capital Spread workload Share decision making Easier to raise funds
i.e. loans etc
Disadvantages More people to share
in the profits General partners have
unlimited liability Disagreements can
occur Partnership may be
dissolved if partner dies
Aims of Lesson 2
Last Lesson
1. Partnerships??
2. Advantages/ Disadvantages of Partnerships
Today’s Lesson
1. Partnership Agreements
2. Section 24 of Partnership Act
Partnership Agreements
Most partnerships create a Partnership Agreement when forming. This will include details of: Amount of Capital to be invested How profits and losses should be shared Amount of drawings allowed Interest on Capital Interest on drawings Salary agreements
Section 24 of Partnership Act 1890
When partners do not create a partnership agreement they are protected by section 24 of Partnership Act 1890. It states: All partners are entitled to contribute equally Profits and losses are to be shared equally No interest is payable on capital invested Partners are entitled to 5% on loans given to the
partnership Accounts must be freely available to partners No salaries No new partners can be introduced without prior
agreement
Aims of Lesson 3
Last Lessons Partnerships?? Advantages/
Disadvantages of Partnerships
Partnership Agreements
Section 24 of Partnership Act
Today’s Lesson
1. Limited partners
2. Accounting for partnerships
Limited Partners Under the Limited Partnership Act 1907 a
partnership may register to allow one or more partners to have limited liability
Limited partners may not: Withdraw any capital they have invested during
the lifetime of the business Manage the partnership Makes contracts on behalf of the partnership
Partnership Accounts
In addition to a T, P and L Account, a partnership will prepare an Appropriation Account, and keep separate Capital, Drawings and Current Accounts for each partner