BY:

NUR AMRINA ROSYADA BT IDRUS SAAIDY

NOR AMALINA BT KAMARUDDIN

NUR SYAMIMI BT ISMAIL

Describe the characteristics of a partnership Describe the advantages and disadvantages of a partnership Explain the meaning and use of the terms in a partnership agreement Prepare financial statements for a partnership

Partner can act on behalf of partnership to enter a contract, Provided the contract is within regular operation of the enterprise

If partnership cannot pay debts in the case of dissolution personal assets of each partner can be MUTUAL UNLIMITED taken and the AGENCY LIABILITY proceeds will be used to pay debts CHARACTERISTICS
LIMITED LIFE Partnership is dissolved when there are changes in ownership Partners dies/ withdrawn New Partner join

FORMATION 2 > person join together to carry on a bussines in common with a view of earning profits Max no allowed: Regular, 20 person Professional, 100 person

ASSETS
All assets contributed belong to partnership Partners co-owners/ joints owners of

Advantages
Cheap and easy to set up

Disadvantages
Unlimited Liability Limit Life Management Disagreements Share Profit

Have More Capital and Skills

Share Loss

Interest on drawings Interest on capital Partners salaries Interest on loan from partner to the partnership Profit and loss sharing ratio

All profit or losses are shared equally Partners are not eligible for interest drawings Partners are not eligible for interest capital Partners are not eligible for salary Loans or advances by partners to the business will carry an interest at the rate of 8% per year.

1. To record investment/contribution of each partner to the partnership. Debit Appropriate asset account (at market value) Credit Capital account partner
2. To record interest on drawings. Debit Current account partner Credit Interest on drawings (To charge interest on amount of drawings) Debit Interest on drawings Credit Appropriation (To close interest on drawings)

3. To record interest on capital

Debit Interest on capital Credit Current account partner (To allow interest on fixed capital) Appropriation Credit Interest on capital (To close interest on capital)

Debit

4. To record partners salaries

If salary is paid : Debit Partners salary Credit Cash/Bank The salary account will appear in the trial balance. If salary is not yet paid : Debit Partners salary Credit Current account partner To close the partners salary account total (paid and/or unpaid) Debit Appropriation Credit Partners salary

5. To record the distribution of the balance of profit or loss

Debit Credit

Appropriation Current account partner (To distribute balance of profit to the partners)

Debit Credit

Current account partner Appropriation (To distribute balance of loss to the partners)

6. To record interest on loan from partners. If interest on loan from partners is already paid Debit Interest on loan Credit Cash/Bank If interest on loan from partners is not yet paid Debit Interest on loan Credit Current account partner To close interest on loan account Debit Profit & loss account/Income Summary Credit Interest on loan

Capital Account

Partner A
Balance c/d XXX

Partner B
XXX Bank Balance b/d

Partner A
XXX XXX

Partner B
XXX XXX

Current Account
Balance b/d Interest on Drawings Drawings Loss Balance c/d

Partner A Partner B XXX XXX Balance b/d

Interest

on

Partner A XXX XXX XXX XXX XXX XXX XXX XXX

Partner B XXX XXX XXX XXX XXX XXX XXX XXX

XXX

XXX

XXX XXX XXX

XXX XXX

XXX XXX XXX

XXX XXX

capital Interest on loan Salary (unpaid) Profit Balance c/d

Balance b/d

Balance

b/d

Capital Account
Interest on Drawings Drawings Loss Balance c/d

Partner A Partner B XXX XXX Bank

Interest

on

Partner A XXX XXX XXX XXX XXX XXX XXX XXX

Partner B XXX XXX XXX XXX XXX XXX XXX XXX

XXX XXX XXX

XXX XXX XXX

capital Interest on loan Salary (unpaid) Profit Balance c/d

Balance b/d

XXX XXX

XXX XXX

Balance

b/d

Statement of Comprehensive Income Statement of Financial Position