ACC 11 TERM 1 WEEK 7 – 10 Financial Accounting of partnerships – preparation

TOPIC – Financial Accounting of partnerships – preparation

Definition and explanation of accounting concepts unique to
partnerships:
• Partnership
• capital accounts
• current accounts
• interest on capital
• salaries to partners
• bonus to partners
• division of profits/losses.
Textbooks
Examples of
partnership
agreements
Accounting
stationery
GAAP
principles
Definition and explanation of Generally Accepted Accounting
Practice (GAAP) principles:
• historical cost
• prudence
• materiality
• business entity rule
• going concern
• matching
Bookkeeping of a
partnership
Accounting cycle of partnerships:
• documents and journals
• Post to the Ledger
• Trial Balance
Preparation of final accounts and financial statements of a
partnership taking into account yearend adjustments
Accounting equation
Year-end adjustments:
• trading stock deficit/surplus
• consumable stores on hand
• depreciation (on cost price/ straightline, on diminishing
balance methods)
• bad debts
• bad debts recovered (Including reciepts from solvent estates)
• correction of errors/omissions
• accrued income (receivable)
• income received in advance (deferred)
• expenses prepaid
• accrued expenses (payable)
• provision for bad debts
• salaries to partners
• bonus to partners
• interest on capital
• Interest on loan (Capitalized)
• appropriation of profit/loss.

Final accounts:
• Trading account
• Profit and Loss account
• Appropriation account
Reversal of certain yearend adjustments at beginning of next
financial period, i.e. accruals, income received in advance and
prepayments
Financial statements and notes:
• Income Statement
• Balance Sheet