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Partnership Accounts

How do you create each partners current account? Is it the same as the drawings account?

How to you apportion the profit share to each partners current account?


Posted by Annette on Mar 31, 2012 8:09 AM BST

Hi Annette,

Firstly, I'm not an expert on partnership accounts so please check the following with your accountant as he/she may prefer a different approach.

Each partner has three types of equity accounts:
1. The Capital Account representing the money paid into the business by the partner
2. The Current Account representing the partner's share of retained profits from previous years
3. The Drawings Account representing the money withdrawn by the partner in the current year

You should therefore create equity accounts in Solar Accounts to have this structure:

Owners Equity - John Smith
Owners Capital Account - John Smith
Owners Current Account - John Smith
Owners Drawings - John Smith
Owners Equity - Paul Jones
Owners Capital Account - Paul Jones
Owners Current Account - Paul Jones
Owners Drawings - Paul Jones

You can create accounts (or account groups) by clicking menu File > New > Account (or Account Group)

When a partner contributes funds to the business you credit their Capital Account; when they withdraw funds your debit their Drawings account.

At the end of each financial year click menu Setup > Financial Year > Start a new financial year. This will cause Solar Accounts to create an end-of-year transaction that credits the Retained Earnings account. You should then create a General Transaction to debit the Retained Earnings account and credit the appropriate partnership current accounts (you will need to manually calculate these figures). In addition, you should create another transaction to clear each partnership drawings account and debit the current account. In this way the Retained Earnings account and the drawings accounts will be zero so only the partnership Capital and Current accounts will appear on the balance sheet at end of year.

Regards,


Posted by Mark McLaren (Solar Accounts) on Mar 31, 2012 2:22 PM BST

How do I make an entry to show a partner's capital contribution?

To credit their capital account, is it File > New > General Transaction

And for the entry is it: From capital account - to - cheque account ?


Posted by David Bennett on Sep 4, 2014 1:15 PM BST

Hi David,

Yes - that is exactly right for recording the capital contribution.

Cheers


Posted by Mark McLaren (Solar Accounts) on Sep 4, 2014 3:58 PM BST