Current account of partners

current account single and columnar

1. Preparation of current account of partners Section 8 Objective 8

2. Current Account Each partner in a partnership company has a fixed separate capital account. The account shows the capital that he or she has invested at the start of the business or during the financial period of the business Using the fixed capital account format, any changes in capital resulting from profit or drawings are shown in each partner current account

3. Prepare current accounts of partners Each partner has a separate current account The credit side of the current shows all the profits of the partner The credit side of the current account shows all the profits of the partner such as salary, interest on capital and the share of residue profits. The debit side of the current account show drawings and interest on drawings

4. Current Account When the current account is balanced, it may have either a debit balance or a credit balance a debit balance indicates that the partner has withdrawn too much money or goods in anticipation of expected profits that the drawings are greater than the amount profits due to the partner that the partner becomes a debtor to the company

5. Prepare current accounts of partners A current account with a credit balance indicates that company owes the partner. Therefore a debit balance in a partner’s current account will be shown under current assets, while a credit balance will be listed as a current liability

6. Example of current account – single form

7. Format of columnar current account