Profit and loss appropriation account

  Transaction of the partnership firm are recorded according to the Double Entry System of accounting. For recording the transactions the procedure followed is similar to that of the Sole Proprietorship. Starting from Journal, Cash Book and other Subsidiary books viz. Purchases book, Sales book etc. Ledger and trial balance are prepared and at the end of the accounting period Profit and Loss account and Balance sheet are prepared to know about the Profitability and the financial position of the firm. Till here there is no difference between the accounts…

guarantee of profit to a partner

Sometimes a partner is guaranteed his minimum share of profits. This guarantee can be given by any of the following: 1) Any one of the partner, 2) Some of the partners in a fixed ratio, 3) All of the other partners in a fixed ratio. If the profit share of the partner to whom guarantee has been given is less than the guaranteed amount then the exess paid to him is charged to the partner/partners who have given the guarantee. If the ratio in which the deficiency to be borne…

interest on drawings – methods

There on two methods of calculating Interest on Drawings:- 1) Simple Method:- Under this method, interest on drawing is calculated separately on each amount of drawings for the duration of time the amount of drawings has been used by the partner i.e. from the date of drawings till the close of accounting period. Inerest on Drawings = Amount of Drawings × (Rate of Inerest/100) × (Months/12) 2) Product Method:- Under this method each amount of drawings is multiplied by its duration. Then all the products are added up and the…