Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes: Accounting for Partnerships: Partnership Financial Statements Example

  • As already said elsewhere partnerships also prepare Financial Statements at the end of every period
  • These do not differ much from say those of a Sole Trader
  • Financial Statements of a Partnership include:
  • An Income Statement for the period ended
  • An Appropriation account for the period ended
  • A Statement of Financial Position as at at the last day of the period
  • If the partnership business is involved in manufacturing a Manufacturing Account is also prepared
  • If it is a business with many departments a departmental Income Statement can also be prepared
  • We will now look at an example involving the preparation of Financial Statements

Example question

Save and Moyo are trading in partnership sharing profits and losses and equally. InterestĀ at 5% per annum is allowed or charged on both the capital account and the current account balances at the beginning of the year. Interest is charged on drawings at 5% per annum. The partners are entitled to annual salaries of: Save $12 000; Moyo $8 000.

Save and Moyo
Trial Balance as at 31 December 20X8
Capital Accounts: Save100 000
Moyo50 000
Current Accounts: Save2 000
Cash Drawings for the year: Save15 000
Moyo10 000
Freehold premises at cost50 000
Stock at 1 January 20x875 000
Fixtures and Fittings at cost15 000
Purchases and Stock Returns380 00012 000
Bank31 600
Sales and Sales Returns6 000508 000
Trade Debtors and Trade Creditors52 40033 300
Carriage Inwards21 500
Carriage outwards3 000
Staff Salaries42 000
VAT8 700
Office Expenses7 500
Provision for doubtful debts2000
Advertising 5 000
Discounts Allowed and received1 2001 000
Bad Debts1 400
Rent and business rates2 800
Accumulated provision for depreciation on fixtures and fittings3 000

720 000

720 000

December 20X8:

  1. Stock on hand was valued at $68 000
  2. Purchase invoices amounting to $3 000 for goods included in the stock valuation at a above had not been recorded
  3. Staff salaries owing $900
  4. Business rates paid in advance $200
  5. Provision for doubtful debts to be increased to $2 400
  6. Goods withdrawn by partners for private use had not been recorded and were valued at: Save
    $500 and Moyo $630. No interest is to be charged on these amounts
  7. Provision is to be made for depreciation of fixtures and fittings at 10% on cost
  8. Interest on drawings for the year is to be charged: Save $360 Moyo $280


  • As you can see this a comprehensive question we will be using it to illustrate partnership basicsĀ  and not just here
  • VAT is a potential stumbling block for you as it is beyond the scope of Ordinary Level Accounting at the time we created this topic. It does not appear in the Income Statement or the Appropriation Account but only appears in the Statement of Financial Position as an Accrued expense.
  • We used this question to create current accounts for Save and Moyo which we posted here.


  1. An Income Statement and Appropriation Account for the year ended 31 December 20×8
  2. A Statement of Financial Position as at 31 December 20×8

To access more topics go to the Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes.