Partnerships are businesses owned by two to twenty partners who share profits and losses.
A partnership agreement sets out the profit-sharing ratio, interest on capital, interest on drawings and partners' salaries. Profit is shared in an appropriation account. If two partners share RM60,000 equally, each receives RM30,000. Each partner has a capital account and a current account.
Remember
- Profit is divided in the appropriation account per the agreed ratio.
- Partners have both a capital account and a current account.