Partnership Current Accounts Walkthrough with T Accounts ( AAT level 3 ) - AAT financial statements

In todays video I walk you through two separate examples of a partners current account in the form of T accounts to help with your understanding.
If you are currently studying towards an AAT qualification, ACCA, ACA, CIMA, CPA or other accountancy qualification then this video might be useful towards your understanding. Here I break down two examples which include:
-Profit share
-Balance brought forward from prior financial statements
-Salary
-Drawings
-Interest on drawings
-Balance carried down in this financial year
Let me know if you found this video useful and give it a huge thumbs up if it was helpful :)

[@richardbalogh2433]

Thank you for the video. The balance b/d could be debit balance too right ?

[@RebeccasFinanceTutorials]

Hi Richard yes it depends on what information is provided in the question x

[@Nathan-vn5tg]

Could you make more videos like these. You can’t even imagine how helpful they are. Thank you.

[@RebeccasFinanceTutorials]

Aww thanks Nathan and yes of course hun x

[@SalmanKhan-op4wu]

Mann I finally understand what’s happening in current accounts now thankssss

[@RebeccasFinanceTutorials]

That's excellent Salman :D

[@S-vr6ou]

Hi Rebecca, If you started with a net loss and profit share appropriation was a loss would this still credit the partner current account?

[@spennysimmo3006]

Thank you for this video. Can I check something with you as I am studying partnership appropriation right now. I am learning that the partner percentage profit share is based on the net profit "after" the profit has been adjusted for salaries and interest. In your examples you are apportioning the net profit with the profit sharing ratio before these adjustments? So profit £99,000 less salaries of £18,000 plus interest on drawings of £1,000 = £82,000 and then credit that as the profit share 70/30?

[@RebeccasFinanceTutorials]

Hi Spenny that's a very good question hun and you are 100% correct with stating that we would appropriate the net profit. When it comes down to the question, it would really depend on what the question is asking, usually when we calculate net profit we have already taken into account total salary paid in the year as it is included in the admin charges in the statement of profit or loss so when we split out the net profit we can take the total in the question as we are apportioning what is left effectively. However if the question shows that the profit does not include an adjustment for salary for example then we would need to deduct the salary there before working out the apportionment but the question would need to make that clear. I hope this helps x

[@samueltaylor3454]

Hi, thanks for the video really helpful - may be a stupid question, but why are the drawings a debit, I can never quite get my head around, why drawings are a debit, I always thought that money withdrawn through drawings would also end up in the individuals current account ? Could you explain why it doesn't pleased :)

[@RebeccasFinanceTutorials]

Hi Samuel its a good question, in effect they are a debit because this is money or assets withdrawn from the business so when you look at the account of the partner, its not really the account of the partner but more the amount of money owed back to the business in relation to monies etc. taken out by that partner. i.e. it is a debtor to the business in effect (but it is not classified this way). The two entries are a Debit to drawings and then a Credit usually to either the bank (for money withdrawn as it reduces the cash left in the bank) or alternatively a reduction to stock for example (where a business owner has taken stock for themselves out of the business). I hope this helps x

[@justingeorge6250]

Are you not meant to do all deductions, i.e Salary and Interest on Drawings before splitting the profit? That would bring you down from your Gross Profit to Net Profit.

[@justingeorge6250]

I've just seen Spennys comment, it wasn't showing before

[@RebeccasFinanceTutorials]

Ah don't worry Justin it is a relevant point x

[@adnanshahid1833]

Hey Kindly reply to my query I'm an acca finalist and after completion i want to get exemptions in icaew and directly join the firm for articleship in UK. Also I don't live in uk so Can I apply for articleship through paksitan and they arrange my visa or I've to arrange it myself and have to come there to apply. Thankyou

[@RebeccasFinanceTutorials]

Hi Adnan I am not sure that I am understanding the above please can you give me a bit more information here, I think what you are saying is that you will soon complete ACCA but want to then study ACA under ICAEW and apply exemptions but let me know either way and I will try and help point you in the right direction.