Theory question 102
Partnership AccountsExplain the following: (a) Partner's current accounts; (b) Partnership appropriation accounts; (c) Limited partners.
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(a) Current account: kept for each partner when capital accounts are fixed; credited with interest on capital, salary and share of profit; debited with drawings, interest on drawings and share of loss; its balance is what the firm owes the partner (or the partner owes the firm).
(b) Appropriation account: prepared after the profit and loss account to share the net profit as the partnership agreement says; it is credited with net profit and interest on drawings, and debited with partners' salaries, interest on capital and each partner's share of the remaining profit.
(c) Limited partners: partners whose liability for the firm's debts is limited to the capital they contributed; they may not take part in managing the business; there must be at least one general partner with unlimited liability.
Say what is debited and credited in (a) and (b).