current account single and columnar

1. Preparation of current
account of partners
Section 8
Objective 8

2. Current Account
• Each partner in a partnership company has a
fixed separate capital account.
• The account shows the capital that he or she
has invested at the start of the business or
during the financial period of the business
• Using the fixed capital account format, any
changes in capital resulting from profit or
drawings are shown in each partner current
account

3. Prepare current accounts of partners
• Each partner has a separate current account
• The credit side of the current shows all the profits of the
partner
• The credit side of the current account shows all the profits
of the partner such as salary, interest on capital and the
share of residue profits.
• The debit side of the current account show drawings and
interest on drawings

4. Current Account
• When the current account is balanced, it may
have either a debit balance or a credit balance
• a debit balance indicates
– that the partner has withdrawn too much
money or goods in anticipation of expected
profits
– that the drawings are greater than the
amount profits due to the partner
– that the partner becomes a debtor to the
company

5. Prepare current accounts of partners
• A current account with a credit balance indicates that
company owes the partner.
• Therefore a debit balance in a partner’s current account
will be shown under current assets, while a credit balance
will be listed as a current liability

6. Example of current account – single form

7. Format of columnar current account