Final Accounts of a Partnership


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In today’s class, we will be talking about the final accounts of a partnership. Enjoy the class!

Final Accounts of a Partnership

Partnership Final Accounts |


  1. Profit & Loss Appropriation Account of a partnership
  2. Balance Sheet of a Partnership

Profit and loss appropriation account of a partnership

This, as the name implies, is the account where either the profit or loss of the partnership business is shared between or among the partners as stipulated in the partnership agreement. The profit and loss appropriation account mark the beginning of the difference between the final accounts of a sole trader and that of a partnership. This is because while the sole trader does not share his profit with any-body, the profit of the partnership must be shared by the partners.

Some terminologies in profit & loss appropriation account of a partnership
  1. Drawings: Partners can withdraw at regular or irregular intervals, from the sum they are entitled to at the end of the year. The total drawings are credited to the cash book and debited to current accounts.
  2. Interest on drawings: This is the interest charged on drawings made by the partners. To discourage or reduce the amount of cash withdrawn, a fixed sum or % will be charged as interest. The interest in the drawing will increase net profit and discourage drawings. It can be calculated on monthly basis. Interest is calculated from the date the amount is withdrawn to the end of the financial year.
  3. Partners’ Salary: The agreement made provision for salary to be paid to active partners. It is desirable to compensate the active partner for the day-to-day running of the business.
  4. Interest on Capitals: Partners contribute different amounts as capital. To compensate the partners for capital contributed, interest on capital is allowed.

The balance sheet of a partnership business

There is no significant difference between the balance sheet of a sole trader and that of a partnership. The only difference is on the display of capital accounts and current accounts of partners which will be illustrated in the formats below:-

Format 1

Trading, profit and loss of A and B Enterprises for the year ended 31st December 2006

N         N                                                                     N         N

Opening stock                                            x                      Sales                                       x

Add Purchases                               x                                  less Returns inwards           x          x

Add Carriage inwards                 x


Less Returns Outwards                  x          x

Cost of goods available for sale         x

Less Closing stock                                       x

Cost of goods sold                                 x

Gross profit c/d                                          x

x                                                                 x


Wages and salaries                                   x                      Gross profit b/d                              x

Depreciation of assets                              x                      Discounts received                        x

Sundry expenses                                        x

Bad debts                                                     x

Interest on loan                                          x

Discount allowed                                       x

Carriage outwards                                    x

Net profit c/d                                            x

X                                                                 X

Format 2

Profit and Loss Appropriation account A and B

N         N                                                                     N         N

Partners salary                                x                      Net profit b/d                                  x

Interest on capital: A         x                                  Interest on drawings:

B          x          x                                                          A         x

Share of profit                                                                                             B          x          x

A (½ x)                       x

B (½ x)                        x          x                                                                      __

X                                                                      x

Format 3

The balance sheet of A and B Enterprises as at 31st Dec 2006

N         N                                             N         N

Capital accounts                              Fixed assets

A                     x                      Furniture & fitting    x

B                      x          x          Less depreciation   x          x

Current accounts                              Motor van                      x

A                     x

B                      x          x          Current assets

Current liabilities                               Stock                          x

Loan                                      x                      Debtor                                   x

Creditors                               x                      Bank                           x

Expenses owing                 x          x          Cash in hand          x          x

X                                              x


O and D are in partnership sharing profit and loss in the ratio 3:2. The following is the Trial Balance as at 31 December 2005

Additional Information

  1. Stock at close N 15,000
  2. Salaries and wages accrued N 1,000

iii.         Electricity prepaid N 20

  1. Interest on capital at 10%
  2. Interest on drawings at 5%
  3. Depreciate motor can 10% on the cost

vii.       Partnership salary: O N 2,000

viii.       Provision for doubtful debts to be reduced to N 200

ix.      O withdrew N 7,000 goods for own use

You are required to:

  1. Prepare the Trading, Profit and loss account for the year ended 31 Dec 2006.
  2. Partners’ capital account
  3. Balance sheet as at 31st Dec. 2006


Trading, Profit and Loss of O and D for the year ended 31st December 2006.

N                     N                                                                     N                     N

Opening stock                                10,000                        Sales                                         200,000

Add purchases       120,000                                              Less Returns inwards                  4,000

Add carriage inwards 1,200


Less Ret outwards    2,000


Less Goods withdrawn 7,000      112,200

Cost of Goods available for sale122,200

Less closing stock                              15,000

Cost of goods sold                                    107,200

Gross profit  c/d                               88,800

196,000                                                                        196,000

 Expenses                                                              Gross profit bld                         88,800

Salaries and wages (wk 1)          16,000                        Discount received                     1,100

A decrease in provision for

Bad debts                                              1,000                        bad debts (wk 3)           100

Office expenses                                   2,400

Discount allowed                                1,150

Electricity (wk 4)                                       30

Carriage outwards                                500

Depreciation-motor can (wk 2)      5,000

Net profit c/d                                63,920

90,000                                                                              90,000

Appropriation account

N                     N                                                         N                     N

Net profit                                          63,920

Partner salary – O                          2,000              Interest on drawings:

Interest on capital:                                                                     O                     300

O                     10,000                                                D                     250                  550

D                       5,000        15,000

Share of profit:

D                     18,988

O                     28,482            47,470

64,470                                                                        64,470

Partnership Columnar current account

O                     D                                                         O                     D

N                     N                                                         N                     N

Drawings                  6,000              5,000              Balance b/f             1,500              3,000

Int on drawings         300                 250              Share of profit       28.482          18,988

Goods withdrawn 7,000             –                       Interest on capital  10,000           5,000

Balance c/d         28,692            21,738            Salary                           2,000                  -____

41,982         26,988                                                41,982         26,988

Bal b/d                 28,692         21,738

Balance sheet as at 31st December 2006

N                 N                                             N         N                     N

Capital: O                              100,000

D                                  50,000           150,000           Fixed assets

Building                         30,000      30,000

Current account:                                                                   Machinery                   109,100     109,100

O                                               28,682                                   Motor van     50,000                    139,100

D                                               21,738           50,420                        Less Depr.    15,000                      35,000


Current liabilities                                                                   Current assets

Loan Okafor                           14,000                                     Stock                                       15,000

Creditors                                 10,000                                     Bank                                         8,000

Bills payable                             9,000                                     Debtors                       20,000

Wages owing                          1,000 34,000                         Less provision             200       19,800

Bills receivable                         17,500

Electricity prepaid          20      60,320

234,420                                                      234,420


  1. Salaries and wages

Amount paid                      15,000

+  Owing                                   1,000

Profit and loss                      16,000

  1. Depreciation: Motor van

10% x 50,000

Profit and loss                      5,000

Accumulated depreciation = 10,000 + 5,000 = 15,000

  1. Provision for bad debts             4.         Electricity                  50

Old provision                                   300                                   Less Prepaid                   20

Less New provision                         200                                         Profit and loss          30

Profit and loss                                  100

  1. Interest on capital: 6.         Share of profit

O : 10% x 100,000                                                                O = 3/5 x 47,470 = 28,482

= 10,000                                                                                D = 2/5 x 47,470 = 18,988

D : 10% x 50,000

= 5,000

  1. Interest on drawings:

O : 5% x 6,000

= 300

D : 5% x 5,000

= 250


  1. Explain (a) appropriation account (b)         Balance sheet
  2. What is interest on capital?
General evaluation
  1. List five items that are debited in the sales ledger control account
  2. List five items that are credited in the purchases ledger control account
  3. List five subsidiary books from which the sales ledger control is compiled
  4. State five contents of the Appropriation Account of a partnership
  5. List five characteristics of depreciable assets

Reading assignment

Essential Financial Accounting by O. A. Longe,  Page 249 – 258

Weekend assignment

Use the following information to answer questions 1 – 5.  A, B, and C are in partnership sharing profits and losses in the ratio 3:2:1 respectively. Their capital accounts are A: N60,000 B. N40,000 and C: N 30,000. Interest on capital is agreed at 5% p.a. interest on drawings is also agreed at 5% p.a. Their drawings for the year are A: N 6,000 B: N 4,000 and C: N 3,000. The profit for the year before an appropriation is N 30,000 C is entitled to a partnership salary of N2,000 p.a

  1. What is the total of A and B’s interest on capital? (a) N4,000 (b) N3,000 (c) N5,000 (d) N10,000
  2. What is the total of B and C’s interest on the drawing? (a) N350 (b) N250, (c) N450 (d) N400
  3. Total interest on the partners’ capital for the year is (a) N7,000 (b) N6,000 (c) N6,500 (d) N5,500
  4. Total credit entries in the appropriation account is (a) N550 (b) N30,000 (c) N35,500 (d) N30,550
  5. Which of the following is not debited to the profit and loss appropriation account? (a) C’s salary (b) Partner’s interest on capital (c) Share of profit (d) Share of loss


  1. Write short notes on (a) Interest on capital (b) Interest on drawing
  2. Give the double entries for the following in the final account of a partnership. (i) Interest on drawings N500 (ii) Partnership salary N3,000 (iii) Interest on capital N5,000 (iv) Share of profit N10,000


In our next class, we will be talking about the Admission of Partners.  We hope you enjoyed the class.



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