CURRENT ACCOUNT AND PARTNERSHIP DISSOLUTION
CONTENTS:
- Purpose of preparing current account
- Preparation of partnership account
- Dissolution of partnership
CURRENT ACCOUNT
In order to keep each partner’s capital fixed year by year in the capital account, the current account is prepared to take care of profits, interest on capital and salaries to which the partners may be entitled on the credit side while the drawings and interest on drawings are debited to it. The balance of the current account at the end of each financial year will then represent the amount undrawn or withdrawn profits. A credit balance will be undrawn profits while a debit balance will be drawings in excess of the profits to which the partner was entitled.
Preparation of Partnership Account
Example 1: Ogundele and Dapo are in partnership sharing profit and loss in the ratio 3:2.The following is the trial balance as at 31st December, 2005.
Additional information:
- Stock at close N15, 000
- Salaries and wages accrued N1, 000
- Electricity prepaid N20
- Interest on capital at 10%
- Interest on drawings at 5%
- Depreciate motor van 10% on cost
- Partnership salary: Ogundele N2, 000
- Provision for doubtful debt to be reduced to N200
- Ogundele withdrew N7, 000 goods for own use
You are required to prepare:
- Trading, profit and loss account
- Partners capital and current account
- Balance sheet as at 31st December 2005
Solution
Trading, profit and loss account of Ogundele and Dapo for the year ended 31st December, 2005
Appropriation Account
Current Account
Balance sheet as at 31st December, 2005
EVALUATION:
- Explain the purpose of current account in partnership
DISSOLUTION OF PARTNERSHIP
MEANING: Dissolution of Partnership is a situation where the partnership business is brought to an end or winds up by the happening of certain event which makes it unlawful to operate.
- NEW: Download the entire term's content in MS Word document format (1-year plan only)
- The complete lesson note and evaluation questions for this topic
- The complete lessons for the subject and class (First Term, Second Term & Third Term)
- Media-rich, interactive and gamified content
- End-of-lesson objective questions with detailed explanations to force mastery of content
- Simulated termly preparatory examination questions
- Discussion boards on all lessons and subjects
- Guaranteed learning