Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Partnership Accounts


Published on

Published in: Economy & Finance, Business
  • Login to see the comments

Partnership Accounts

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