Summary about Partnership Accounting
Accounting for a partnership is for the most part the same as accounting for a sole trader except in the following respects.
- The initial capital put into the business by each partner is shown by means of a capital account for each partner.
- Each partner also has a current account and drawings account.
- The net profit of the partnership is appropriated by the partners according to some previously agreed ratio.
- Partners may be charged interest on their drawings, and may receive interest on capital. If a partner makes a loan to the business, he will receive interest on it the normal way.
- Partnerships may be terminated either by closing down the business entirely or by disposing of the business as a going concern to a limited company.