YEAR END PROCEDURES APPROPRIATION ACCOUNT GRADE 11 ACCOUNTING

YEAR END PROCEDURES & APPROPRIATION ACCOUNT GRADE 11 ACCOUNTING MODULE 3 LESSON 3

YEAR END PROCEDURES The following procedures relate to SOLE TRADER & PARTNERSHIP: 1. DR Sales CR Debtors Allowances 2. DR Sales CR Trading Account 3. DR Trading Account CR Cost of Sales 4. Close off Gross profit by: DR Trading Account CR Profit & Loss 5. DR all Income CR Profit & Loss 6. DR Profit & Loss CR all expenses. AT THIS POINT THE PROCESS CHANGES!!!!!

YEAR END PROCEDURES In a partnership the profit or loss has to be shared between partners HOW? ? • Appropriation Account needed Used to facilitating the splitting of the profits/losses It is found in the Final Accounts section (after Trading Account and Profit & Loss accounts)

YEAR END PROCEDURES SOLE PROFIT & LOSS PROPRIETOR Capital (net profit) PARTNERSHIPS PROFIT & LOSS Appropriation Account (Net Profit) CAPITAL APPROPRIATION ACCOUNT Profit & Loss (net Profit) Current account: A Current account: B CURRENT ACCOUNT: A Profit & Loss (share in profit) Profit & Loss (net Profit) CURRENT ACCOUNT: B Profit & Loss (share in profit)

YEAR END PROCEDURES Profit & Loss was DEBITED (net income) Appropriation is CREDITED (profit) • Then allocated according to profit sharing ratio Current account is CREDITED (relevant share) REMEMBER: DO NOT TRANSFER NET PROFIT TO CAPITAL!!!!!

YEAR END PROCEDURES Current accounts are CREDITED • Represents their portion of the net income • What partners are entitled to based on the partnership agreement. • Drawings a/c will reflected a DEBIT balance b/d. • Represents what owners have actually withdrawn including actual salaries taken. • Needs to be offset against their portion of the share of net profit • CR to Close off Drawings a/c's to the respective side of a/c's of each partner

EXAMPLE PAGE 105 General Ledger of King Kong Traders BALANCE SHEET SECTION CAPITAL KING BANK CRJ 400 000 CRJ 200 000 CAPITAL: KONG BANK

EXAMPLE PAGE 105 CURRENT ACCOUNT: KING CURRENT ACCOUNT: KONG

EXAMPLE PAGE 105 DRAWINGS: KING Balance b/d 36 000 DRAWINGS: KONG Balance b/d 24 000

EXAMPLE PAGE 105 FINAL ACCOUNTS SECTION PROFIT & LOSS Appropriation account GJ 120 000 APPROPRATION ACCOUNT Current acc: King 80 000 Current acc: Kong 40 000 120 000 Profit & Loss GJ 120 000 120

EXAMPLE PAGE 105 CURRENT ACCOUNT: KING Drawings: King gj 36 000 Appropriation Acc 80 000 CURRENT ACCOUNT: KONG Drawings: Kong gj 24 000 Appropriation Acc 40 000

EXAMPLE PAGE 105 DRAWINGS: KING Balance b/d 36 000 Current Acc: King gj 36 000 DRAWINGS: KONG Balance b/d 24 000 Current Acc: Kong gj 24 000

EXAMPLE PAGE 105 CURRENT ACCOUNT: KING Drawings: King gj Balance c/d 36 000 Appropriation Acc 80 000 44 000 80 000 Balance b/d 44 000 CURRENT ACCOUNT: KONG Drawings: Kong gj 24 000 Balance 16 000 c/d Appropriation Acc 40 000 Balance b/d 16 000

EXAMPLE PAGE 105 GENERAL JOURNAL OF KING KONG TRADERS – FEBRUARY 2002 28 Profit & Loss 120 000 Appropriation Account 000 28 Appropriation Account 120 000 Current account: King 000 28 Current account: Kong Current account: King Current account: Kong Drawings: King 36 000 24 000 Drawings: King 80 40 36 000 24 000