Capital and Current Accounts

Two Accounts are opened; Capital Account- This account records the capital

injected by the partner. This account remains the same year on year unless new capital is injected.

Current Account- This account records all transactions that affect the capital account these are Profits/Loss – which increases or decreases the capital Interest on Capital earned Interest on Drawings Charged Partners salaries Drawings

Example 3

Skip and U Jump sells toys . The capital contributed by the two partners on 1 st Jan 2003Skip P80,000 and Jump P40,000.

Net profits in Dec 2004 was P30,000.00 and Drawings were SKIp 8000 and Jump 9000.Partners agreed to share profit and losses equally in 2004.

On 1st Jan 2005 the pathers agreed on the following new termsSalaries Skip 10000 and Jump 14000Interest on Capital 7%Profits/Loss to be shared equally

Drawings Net Profit from P/L Skip Jump

2005 38000 13000 170002006 29000 12000 20000

RequiredAppropriation AccountCurrent accounts for Partners for 3 years.

2004Skip and JumpApproprition Account for the 2004

Net Profit 30,000

Profit Shared Skip 15000Jump 15000

30000

2005 Skip and JumpApproprition Account for the 2005

Net Profit 38,000

Salary Skip 10000Jump 14000

24000Int. on Capital Skip 5600

Jump 2800 84005,600

Profit Share Skip 2800Jump 2800 5600

2006 Skip and JumpApproprition Account for the 2006

Net Profit 29,000

Salary Skip 10000Jump 14000

24000Int. on Capital Skip 5600

Jump 2800 8400-3,400

Profit Share Skip -1700Jump -1700 -3400

Current Account - Skip2004 2004

Drawings 8,000 Profit Share 15,000 Bal c/d 7,000

15,000 15,000 2005

Drawings 13,000 Bal B/d 7,000 Bal c/d 12,400 salary 10,000

Interest on Capital 5,600 Profit Share 2,800

25,400 25,400 2006

Drawings 12,000 Bal b/d 12,400 Loss Share 1,700 Salary 10,000 Bal c/d 14,300 Interest on Capital 5,600

28,000 28,000

Current Account - Jump2004 2004

Drawings 9,000 Profit Share 15,000 Bal c/d 6,000

15,000 15,000 2005

Drawings 17,000 Bal B/d 6,000 Bal c/d 8,600 salary 14,000

Interest on Capital 2,800 Profit Share 2,800

25,600 25,600 2006

Drawings 20,000 Bal b/d 8,600 Loss Share 1,700 Salary 14,000 Bal c/d 3,700 Interest on Capital 2,800

25,400 25,400 Bal b/d 3,700