ZIMSEC O Level Principles of Accounting: Accounting for Partnerships:The Appropriation Account
- Apart from a few nuances partnerships prepare normal financial statements
- These are almost indistinguishable from those of Sole Traders
- They include the usual Income Statement ( Trading and Profit and Loss Account) and the Statement of Financial Position
- If this is a manufacturing partnership the Manufacturing Account is also prepared
- In addition to these and Appropriation Account is also prepared
- It is usually prepared after or as part of the Income Statement
- If you prepare it as part of the Income statement remember to include it in the heading
- For example:
Income Statement and Appropriation Account for the year ended 20X8
- The Appropriation account is used to show the share of profits, any interest on capital, salaries, interest on drawings etc that are attributable to each of the partners
- The corresponding entries are shown in the Current Account/Capital Account (in instances where a fluctuating capital balance is used)
The format of an appropriation account
| $ | $ | $ | |
| Net Profit transferred from the Profit and Loss Account | 50 000 | ||
| Interest on Drawings: Tawanda | 500 | ||
| Calvin | 1 000 | ||
1 500 |
|||
| 51 500 | |||
| Less: | |||
| Salary: Calvin | 4 000 | ||
| Interest on capitals: | |||
| Tawanda | 1 000 | ||
| Calvin | 3 000 | ||
15 000 | |||
| (19 000) | |||
32 500 |
|||
| Balances of profits shared: | |||
| Tawanda (60%) | 19 500 | ||
| Calvin (60%) | 13 000 | ||
32 500 |
|||
- The above is an example of what an Appropriation account ought to look like
- An example question involving an Appropriation Account can be found here
To access more topics go to the Principles of Accounts Notes.
