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Dear sir,
I need to clear three of my concepts..
1)called up share capital means the amount immediately askd for by the Co to b paid by Shareholders? So does tht mean Shares were issued on credit?
2)Why is drawings debited to Current a/c when it reduces Capital?
3)Interest on Capital,Salaries are all credited to Current A/c., so does it represent an unpaid amount owed by the Partnership Business to Partners?In answer to (1), it isn’t really that they are issued on credit. But the shareholders do pay in instalments rather than all at one time.
With regard to (2) and (3) – partnership was removed from the syllabus for Paper F3 many years ago!
(The capital and current accounts together represent the total owed to the partners. The capital stays at a fixed amount most of the time, whereas the current account keeps changing as they make a profit and as they take drawings. Partners do not get paid interest on capital or salaries – it is simply a way of deciding how to split the profit, and the print is credited to the current account because there is more owing to the partners.)
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