Equity of Owner

Capital Account
1. Each partner has its own Capital Account. If the partnership has 4 partners, then 4 Capital Accounts need to be opened.

2. The partner’s Capital Account is credited with the capital contributed by the partner.

3. There are two ways to record the partner’s capital:
(a) fixed capital way
(b) the way capital changes

Current Account
1. The current account is an open account to record:
(a) partner debt to a partnership firm
(b) the debt of the partnership firm to the partner

2. The partner’s debt to the partnership firm is noted next to the Current Account debit, for example:
(a) takeout

(b) interest on takeout

(c) distribution of loss

3. Debt-to-partner firm debt is recorded on the side of Current Account credits, for example:
(a) interest on capital

(b) partner’s salary (accrued)

(c) interest on borrowings from partners (accrued)

(d) partner bonus (accrued)

(e) profit sharing

4. Current Account Notes in Balance Sheets

(a) Only the final balance of the Current Account should be reflected in the Balance Sheet. The Current Account in detail does not need to be reflected in the Balance Sheet.

(b) Credit Balance Current Account of a partner is shown under the Owner’s Equity in Balance Sheets.

(c) Debit balance The Current Account of a partner is usually indicated under the Owner’s Equity in the Balance Sheet but as a negative number (in parentheses).