AS 91405 · 4 credits · Internal
Partnership accounting
Demonstrate understanding of accounting for partnerships
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This standard asks you to show you understand how partnerships work from an accounting perspective. You need to know how to record the money and assets partners put in, how profits get split between partners, and how to show all of this in financial statements using partnership accounting rules.
What to do, grades and common mistakes
- ·Record the accounting entries when a partnership is first set up, using the agreed values of assets, liabilities, and what each partner contributes
- ·Understand and apply the Partnership Agreement and the Partnership Act 1908 to partnership accounting situations
- ·Set up and maintain separate capital and current accounts for each partner
- ·Prepare a Profit Distribution Statement that shows how profits are divided between partners
- ·Present the equity section of financial statements and supporting notes that correctly show partnership capital and current account balances
You apply the basic partnership accounting entries and can record capital contributions, maintain partner accounts, and show profit distribution in financial statements.
You explain why certain accounting entries and treatments are needed in a partnership context and justify your choices by reference to the Partnership Agreement or Act.