Once all adjustments have been agreed, the total increase/
decrease is attributed to the partners' capital accounts in the
same proportion as that in which they share profits and losses.
Example
| Example (i) | |||||
|
A SAMPLE PARTNERSHIP BALANCE SHEET
|
|||||
| Liabilities | £ | Assets | £ | ||
| Sundry creditors
Overdraft Mortgage | 6,428
1,325 2,452 | (2)
(3) | Moreton Farm
Improvements | 15,000
6,183 |
|
| P W Johnson (deceased)
Capital Account at 13/3/89 Add share profit Less drawings Less Income Tax (6) J P Johnson A T Johnson |
+ _ _ | 27,892
7,952 6,895 2,100 26,849 19,764 25,107 81,925 |
(4) (5) | Plant and Machinery
Loose tools/implements Vehicles Dairy herd Debtors and repayments Cash at bank Lloyds Bank (Jersey) deposit | 7,623
3,416 2,310 12,650 2,389 7,352 25,000 81,925 |
| (1) Make sure this is the
date of death or very close.
|
| (2) Refer to Valuation
Office (VO) (
IHTM23002) with details of any
agricultural relief due. You will also need details of the milk
quota.
|
| (3) Where this item
appears, it will be part of the `book value' of the farm which
needs adjusting when VO report received - see (ii) below.
|
| (4) Refer to Shares and
Assets Valuation (SAV) (Livestock).
|
| (5) At least part of this
may be an excepted asset (
IHTM25351).
|
| (6) Income tax is a personal liability and should be added back, but allowed as a deduction against non-IOP.( IHTM25112) |
| Example (ii)
ADJUSTING THE DECEASED'S CAPITAL ACCOUNT P W Johnson and his two sons share profits equally. The following adjustments need to be made: 1. DV reports an agreed value of £45,000 for Moreton Farm as partnership property (an increase of £23,817 over the combined book value of £15,000 and £6,183). 2. Dairy herd agreed at £14,500, an increase of £1,850. 3. The final figure for the overdraft is £2,895, an increase of £1,570 in debts. The total increase in the assets of the business is: £23,817 + £1,850 _ £1,570 = £24,097 1/3 = + £ 8,032 Deceased's Capital Account as Balance Sheet £26,849 Revised Capital Account £34,881 Add back Income Tax (agreed as personal + £ 2,100 liability) Final revised Capital Account £36,981 |
| Example (ii)
ADJUSTING THE DECEASED'S CAPITAL ACCOUNT P W Johnson and his two sons share profits equally. The following adjustments need to be made: 1. DV reports an agreed value of £45,000 for Moreton Farm as partnership property (an increase of £23,817 over the combined book value of £15,000 and £6,183). 2. Dairy herd agreed at £14,500, an increase of £1,850. 3. The final figure for the overdraft is £2,895, an increase of £1,570 in debts. The total increase in the assets of the business is: £23,817 + £1,850 _ £1,570 = £24,097 1/3 = + £ 8,032 Deceased's Capital Account as Balance Sheet £26,849 Revised Capital Account £34,881 Add back Income Tax (agreed as personal liability) + £ 2,100 Final revised Capital Account £36,981 |
