When a partnership is formed each partner puts in some capital to the business, and
each is recorded separately in a series of capital accounts, so that a record I skept of
how much is owed to whom.
each partner will also have a current account, which is used to record the profits
retained in the business by the partner and it differs from the capital account in that
the later remains ‘static’ from year to year whereas a current account is continually
changing due to the making of profits and drawings.
Basically any income transferred to the current account, is a credit entry, and any
expense charged to the current account is a debit entry.
Interest on Capital
a partnership agreement also provides for interest on the balance of the partner’s
capital account NOT the current account. The interest received by each partner is
transferred to the current account.
whenever a partner makes any drawings, the transaction is recorded in a drawings
account as with sole traders. Yet, in addition, at the year end the drawings will be
cleared to the current accounts.
Loan to the Partnerships
Partners may loan the business some money, whilst earning interest from the
business too. This loan is treated as a current or