ACCT 301 Lecture Notes - Capital Account
Document Summary
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. 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. Drawings 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. Partners may loan the business some money, whilst earning interest from the business too.
