Originally Posted by
Mark Atkinson
So basically, I need to do a "manual" year end where I zero all income and expense accounts to the created appropriation account?
Not quite - you don't zero each income and expenditure account individually. You debit the appropriation account with a single value, being the net profit, and debit the same value to the capital accounts, split according to the partners' profit shares.
As a simple example, this is what your income statement will look like after the journal:
Sales ............................. 100,000
Less: expenses
Bank charges ..... 200
Repairs ........... 2,000
Insurance .......... 700 ...... 2,900
Net profit before approp ..... 97,100
Less: Appropriation .......... -
97,100
Net profit after approp .......
Nil
Originally Posted by
Mark Atkinson
Also, in partnership accounting partners have both capital accounts and current accounts. Everything goes through the current accounts (drawings included) and only capital contributions go through the capital account. Would this impact your suggestion at all? Can I just create extra current accounts?
Yes, I would simply create another main account in the balance sheet called Current Accounts, with a sub-account for each partner.
Originally Posted by
Mark Atkinson
The only problem I see is that the income statement will reflect a zero profit/loss. I need the financial statements to show accurate figures at year end. I suppose I could just take the pre-year end income statement?
Although the income statement will reflect a zero profit/loss after appropriation, you will still see the net profit/loss before appropriation. See my example above.
Originally Posted by
Mark Atkinson
How would I tackle the issue of Salaries to partners? Basically when partners take salaries throughout the year, it is debited from their current accounts as Drawings. At year end their salaries are actually processed and are credited to their current accounts. The problem lies in the fact that the partners' salary accounts are theoretically only created at year end.
In other words, during the course of the year, you would debit their current accounts (and credit Bank) and at year-end you would debit Salaries in the income statement and credit their current accounts. I'm not sure why you can't debit Salaries and credit Bank immediately during the course of the year?
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