The appropriation account
The appropriation account shares out a partnership's profit: salaries and interest first, then the rest in the profit sharing ratio.
Task 1From profit to residual profit4 questions
The appropriation account starts where the statement of profit or loss ends: with the profit for the year. It shows how that profit is shared between the partners.
- Start with the profit for the year
- Take away partners' salaries
- Take away interest on capital
- Add interest on drawings, which the partners are charged
- What is left is the residual profit, shared in the profit sharing ratio
| £ | |
|---|---|
| Profit for the year | 50,000.00 |
| Less salary: Ben | (8,000.00) |
| Less interest on capital: Nia | (2,000.00) |
| Less interest on capital: Ben | (1,000.00) |
| Add interest on drawings: Nia | 300.00 |
| Add interest on drawings: Ben | 200.00 |
| Residual profit | ? |
Task 2Sharing the residual profit4 questions
Task 3What each partner gets in all2 questions