The notes to the annual report for KPMG LLP (U.K.) indicated the following policies regarding the partners’ capital:

The allocation of profits to those who were partners during the financial year occurs following the finalization of the annual financial statements. During the year, partners receive monthly drawings and, from time to time, additional profit distributions. Both the monthly drawings and profit distributions represent payments on account of current-year profits and are reclaimable from partners until profits have been allocated.

Assume that the partners draw £40 million per month for 2012 and the net income for the year is £600 million. Journalize the partner capital and partner drawing control accounts in the following requirements:
a. Provide the journal entry for the monthly partner drawing for January.
b. Provide the journal entry to close the income summary account at the end of the year.
c. Provide the journal entry to close the drawing account at the end of the year.
d. Why would partner drawings be considered “reclaimable” until profits have been allocated?

  • CreatedMay 07, 2012
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