Accounting for Partnership - Lesson 1

Objectives

At the end of the lesson the students should be able to
1.  define a partnership business
2.  state the features of a partnership
3.  give reasons for establishing partnerships
4.  outline the essential components of a partnership agreement
5.  record partnership capital in the different types in the fixed and fluctuating capital accounts
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Prior Knowledge
Before we begin our lesson let us recap the different forms of business and the difference between each type of business.

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Introduction

We will begin our lesson with a review of the different types of business structures.

Procedural Development

The focus this lesson is the partnership structure of business.

In the comments section below, write in your own words a definition of partnership. Respond to one of the post made by the group and indicate if you agree with their definition and state one reason for your answer.

Visit the website  http://wizznotes.com/accounts/introduction/the-accounting-equation/partnership and compare your definition of partnership with the one provided.

Was there a difference between your definition and the one provided?

In the video below note the feature/characteristics of a partnership business.

ACRA, (2011), Types and Features of Business Entities, Available at https://www.youtube.com/watch?v=S51EQS9ykqQ, (accessed 23/3/2015).

In the comments section below compared to sole trader business state one advantage and one disadvantage of a partnership business.  Type not to state the same response as other members of your group.

Before a partnership business can begin operating the partners must decide on the agreement under which they will operate.

           

https://www.youtube.com/watch?v=x09DaDHyqpQ

What a some of the essential components of a partnership agreement?

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Spend some time examining each component of the partnership agreement.  Ensure that you understand each component and how it impacts on the final accounts of the business.

Absence of a partnership agreement

If there is no partnership agreement there would be

• no salary to partners
• no interest on capital
• profits and losses are shared equally
• no interest on drawings
• if a partner puts more money into the business above the agreed capital, the partner is entitle to interest at the rate of x% per annum on the excess.

Let us now examine how partnership business raise their capital.

Discussion

What is the difference between a fixed capital and a fluctuating capital account?

Assessment

Working in groups look at the worksheet and prepare a solution to the questions.
worksheet

Topic Summary

When two or more individuals come together to do business a partnership is formed.  Each partner is required to make contribution the business’ capital.  A partner can have limited or unlimited liability but at least one partners should have unlimited liability.