Answer to Question #180484 in Accounting for kris

Question

Get yourselves into group. Each group is going to initiate a Partnership business. Discuss the product line of partnership business your group would like to commence.

You are required to include below details in your assignment:

a)Describe the main features of the partnership agreement

-Name of the Firm/Partner’s names

-Type of business and business address

-The amount of capital contributed by each partner

-Ratio of profit/loss allocation between partners

-Salary for active partners

-Interest on capital to each partner

-Interest on drawing for each partner

b)Prepare the partnership income statement and profit and loss appropriation account for your business.(must include the journal, ledger and Trial balance)

c)Prepare the partnership Statement of Financial Position for your business

Answer 1

A business partnership agreement should address finances, how much work everyone should contribute and what everyone’s role should be.

Describe the main features of the partnership agreement

-Name of the Firm/Partner’s names; the names of the partners should form the name of the partnership especially the use of the surname like Tom and Peter Partners.

-Type of business and business address; partners should agree on which business to carry and includes every trade, occupation or profession. Therefore, if the purpose is to carry on some charitable work, it will not be a partnership. The address of the business will be based on the agreement of the partners on where to set their offices of the firms.

-The amount of capital contributed by each partner; partners have to agree on the amount of capital that each partner should contribute. This is majorly done by shares.

-Ratio of profit/loss allocation between partners; the partners may, however, agree to share the profits in any ratio they like. The manner in which the profits/losses are to be shared should be expressly stated in the partnership deed.

-Salary for active partners; partners will have to agree on the remuneration to be paid to the partners who decide to take an active role in the management of the partnership.

-Interest on capital to each partner; Interests will be shared depending on the capital sharing ratio and that is stipulated in the partnership deed.

-Interest on drawing for each partner; drawings on capital will be borne by each partner based on the amount of drawings taken.

b) Prepare the partnership income statement and profit and loss appropriation account for your business.(must include the journal, ledger and Trial balance).

Financial statements are prepared for partnerships the same way as they are for limited liability companies. For partnerships, the balance sheets are usually prepared with the cash and equivalents at the beginning, followed by the current and fixed assets and then liabilities.