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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5027
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Two partners are in business but there is no partnership

Resolved Question:

Two partners are in business but there is no partnership agreement, one partner has taken drawings in excess of his capital share in the business. How is this reflected in the accounts? How does this affect the other partner?
Submitted: 1 year ago.
Category: Tax
Expert: replied 1 year ago.
Thank you for your questionAre you trying to file tax return or preparing accounts in generalMany thanks
Customer: replied 1 year ago.
Preparing accounts in general. The partner who has taken the excess drawings has passed away so accounts need to be prepared to dissolve the partnership.
Expert: replied 1 year ago.
Thank you for your reply.Effectively, his estate owes the partnership the excess of drawings over capital share.If this money is to be written off, it would be absorbed by the remaining partner.You would prepare the final accounts that would reflect the debtor figure within capital account as it would not affect profit and loss account.I hope this is helpful and answers the question.If you have any other questions, please ask mebefore you rate my service – I’ll be happy to respond.
Customer: replied 1 year ago.
Thank you for your response, that's very helpful. I can't see this being written off as there is a lot of debt to pay off in the business. Now that the partnership is to be dissolved, the other partner would like to wind down the business so am I right to assume redundancy costs etc would be his responsibility as a sole trader?
Expert: replied 1 year ago.
Thank you for your reply.Redundancy costs would be the responsibility of the business now, i.e. sole trader.I hope this is helpful. and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Great, thanks for your help today.
Expert: replied 1 year ago.
I thank you for accepting my answer. Best wishes