Prepare partnership statements and partner accounts
Connect the appropriation account to partners' capital and current accounts and the statement of financial position.
Cambridge IGCSE Accounting 0452 / (9–1) 0985, 2027–2029 Version 1. These lessons follow the 2027–2029 syllabus only; the separate 2026 syllabus update is not yet mapped. Written practice is self-checked, not an official Cambridge grade. Full timed-paper practice and human subject-teacher review remain pending.
Before you begin
- No previous accounting study is assumed. Keep the business, transaction and accounting period in view, and distinguish a resource, a claim and a performance result.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
A partner has a $900 debit current-account balance. Does it increase or reduce that partner's equity balance?
What you will learn
- Distinguish fixed capital from current accounts
- Post profit shares and drawings to partners' accounts
- Prepare partnership financial statements using the agreed appropriation
Keep capital and current accounts distinct
Under a fixed-capital approach, partners' capital accounts hold long-term capital contributions, while current accounts record profit share, salary, interest, drawings and other regular movements.
A fluctuating-capital approach records more of these movements in each partner's capital account. Follow the format the question specifies and keep each partner's balance separate.
Complete the statements in order
A partnership can be a trading, service or manufacturing business, or combine these activities. Prepare its statement of profit or loss using the relevant business format and period adjustments.
Transfer profit to the appropriation account, allocate agreed amounts and share the residual profit. Post each partner's credits and drawings to capital/current accounts.
The statement of financial position includes partners' capital and current balances as equity, together with business assets and liabilities. An overdrawn current account is a debit balance and reduces that partner's net equity balance. Apply the sole-trader statement adjustments in section 5.1 where relevant.
Pause and explain
Under fixed capital, a partner has capital $12,000, opening current account credit $800, profit share $3,200 and drawings $2,500. Find the closing total balance.
Worked example
A and B use fixed capital. A's capital is $15,000 and current account credit balance is $4,000; B's capital is $10,000 and current account debit balance is $1,000. Calculate total partners' equity and describe the presentation.
Show the worked solution
- A's total equity balances = 15,000 + 4,000 = $19,000.
- B's net balance = 10,000 − 1,000 = $9,000.
- Total partners' equity = 19,000 + 9,000 = $28,000; present B's debit current balance as a reduction, not as a liability to an outside party.
Answer Total partnership equity is $28,000: A $19,000 and B $9,000 after deducting the debit current balance.
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Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
C and D have fixed capital of $18,000 and $12,000. Their current accounts begin with credits $1,500 and $900; profit shares are $8,000 and $5,000; drawings are $4,200 and $3,600. Calculate closing current balances and total partners' equity.
Give me a hint
Add each partner's profit share to the opening credit and deduct drawings.
Compare my reasoning
- C current balance = 1,500 + 8,000 − 4,200 = $5,300.
- D current balance = 900 + 5,000 − 3,600 = $2,300.
- Total equity = fixed capital 30,000 + current balances 7,600 = $37,600.
C current $5,300; D current $2,300; total partners' equity $37,600.
Look for these in your work
- C balance correct
- D balance correct
- Equity total correct
A partnership earns profit before appropriation $36,000. Interest on loan is $1,200; agreed salaries are $5,000; interest on capital is $3,000; the residual is shared equally. Calculate profit for appropriation and each residual share.
Give me a hint
Deduct loan interest before the appropriation; then deduct the agreed appropriations and divide what remains.
Compare my reasoning
- Profit after loan interest = 36,000 − 1,200 = $34,800.
- Residual after salaries and capital interest = 34,800 − 5,000 − 3,000 = $26,800.
- Each partner's equal residual share = $13,400.
Profit available for appropriation is $34,800; residual is $26,800; each partner receives $13,400 of residual profit, in addition to agreed salary and capital interest.
Look for these in your work
- Loan interest placement correct
- Residual calculation correct
- Equal shares correct
A and B's current accounts show credit balances $2,800 and $1,100 before a further profit allocation of $4,500 each and drawings of $3,000 and $4,000. Find their closing balances and explain B's result.
Give me a hint
Post the allocation as a credit and drawings as a debit in each current account.
Compare my reasoning
- A closes at 2,800 + 4,500 − 3,000 = $4,300 credit.
- B closes at 1,100 + 4,500 − 4,000 = $1,600 credit.
- B still has a credit balance; if drawings had exceeded available credits, the resulting debit balance would reduce net equity.
A current account: $4,300 credit; B: $1,600 credit. A debit balance, if one arose, would reduce that partner's net equity.
Look for these in your work
- A balance correct
- B balance correct
- Debit-balance implication explained
Common mistakes
- Mixing fixed capital contributions with current-account movements
- Showing a debit current account as a credit balance
- Sharing profit before preparing the appropriation account
- Forgetting that drawings reduce a partner's current or capital balance
What can you explain now?
Under fixed capital, where is a partner's annual profit share normally recorded?
Compare with the explanation
The partner's current account
Fixed capital stays unchanged while regular allocations are recorded in current accounts.
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Make it stick
How do fixed capital and current accounts help present partnership equity clearly?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.