Partnership Accounts and Company Accounts
Partnership Accounts and Company Accounts tests profit-sharing adjustments and the corporate share-capital framework.
Partnership
A partnership is a relation between persons who agree to share profits of a business carried on by all or any of them acting for all. Accounts include partners' capital and current accounts. Adjustments cover interest on capital, interest on drawings, partners' salary or commission, and residual profit sharing. Admission, retirement and dissolution require goodwill, revaluation and settlement entries. Goodwill is usually adjusted through partners' capital accounts rather than raised as an asset unless the partnership deed says otherwise.
Company accounts
A company is a separate legal entity with perpetual succession and limited liability. Share capital includes authorised, issued, subscribed and paid-up capital. Equity shares carry residual voting rights and variable dividends; preference shares carry fixed dividends and priority. Calls in arrears, calls in advance, forfeiture and reissue are common entries. Debentures are long-term borrowings, not share capital.
Worked example
Profit is Rs 1,00,000. A's salary is Rs 12,000; interest on capital is A Rs 8,000 and B Rs 5,000. Divisible profit = 1,00,000 - 12,000 - 13,000 = Rs 75,000. If profits share 3:2, A gets 45,000 + 12,000 + 8,000 = Rs 65,000; B gets 30,000 + 5,000 = Rs 35,000. The appropriation is shown before transferring to capital or current accounts.
Traps
Do not charge interest on capital before checking the deed. Drawings reduce a partner's balance. A debenture holder is a creditor, not an owner. Forfeiture is not the same as cancellation without refund; the company follows the articles and law.