Partnership Accounts

Partnership Accounts

            Generally there is no difference between the accounts of sole trading concern and a partnership concern. However there are certain special aspects applicable to partnership accounts which require special mention. These are discussed below ;

Capital Accounts of Partners

            Capital accounts are personal in nature in which the transactions relating to the partners of a firm are recorded. There will be minimum two partners so separate capital accounts are to be prepared in order to ascertain their individual share.

Debit Side	Credit Side
1. Drawings [Cash / Kind] 2. Interest on Drawings 3. Share of loss [ As per profit and loss A/c]	1. Opening of capital[ Capital introduced in the beginning ] 2. Additional capital introduced. 3. Assets brought in. 4. Interest on capital 5. Salary to the partner. 6. Commission to the partner. 7. Share of profit [ As per profit & loss a/c ]

Methods of Maintaining Capital Accounts

            Mainly there is two methods of maintaining capital accounts of partners.

Ø Fixed Capital Method

Ø Fluctuating Capital Method.

Fixed Capital Method

            This method is known as fixed capital method as the original capital invested by any partner remains the same unless additional capital is brought in or part of the capital is withdrawn as per agreement. Hence , all items like drawings, interest on drawings, interest on capital, salary, commission, share of profit or loss, etc., are not to be shown in their capital accounts. A separate account called current account is opened in the name of partners for this purpose. 

            At the end of an accounting period , current account should be balanced if it shows a debit balance, it should be shown in the asset side of balance sheet and if it shows a credit balance, it should be shown in the liability side of balance sheet.

                                                                       Proforma                    

Partners’ Capital Account

Dr                                                                                                                                            Cr

Date	Particular	Amount Rs.	Date	Particular	Amount Rs
	Cash/Bank (Amount withdrawn out of capital) Balance c/d	Xxxx Xxx		Balance b/d Cash/Bank/ Assets (Additional Capital introduced) Balance b/d	Xxxx Xxx
		xxxx			xxxx
					xxx

Proforma

Partners’ Current Account

Dr                                                                                                                                            Cr

Date	Particular	Amount Rs	Date	Particular	Amount Rs.
	Drawings Interest on drawings Profit & loss Appropriation a/c (Share of loss in case of loss) Balance c/d	xxx xxx Xxx Xxx		Balance b/d Interest on Capital Salary Commission P&l Appropriation a/c (Share of profit in case of profit) Balance b/d	Xxx xxx xxx Xxx xxx
		xxxx			xxxx
					xxx

Fluctuating Capital Method

            According to the fluctuating capital method, capital balance of partners keeps on fluctuating from year to year .Under the fluctuating capital method , only capital account is maintained. The yearly adjustments are made directly in the capital account.

Proforma

Partners’ Capital Account

Dr                                                                                                                                            Cr

Date	Particular	Amount Rs.	Date	Particular	Amount Rs
	Drawings Interest on drawings Profit & loss Appropriation a/c (Share of loss in case of loss) Balance c/d	xxx Xxx Xxx xxx		Balance b/d Assets Cash/Bank/ (Additional Capital introduced) Interest on Capital Salary Commission P&l Appropriation a/c (Share of profit in case of profit) Balance b/d	Xxxx xxx Xxx xxx xxx xxx xxx
		xxxx			xxxx
					xxx