Answer to Question #205007 in Accounting for Hasnain Ahmad

Question

• A and B are in partnership. Their agreement states the following.
• Interest is to be allowed on their fixed capitals at the rate of 10% per annum.
• A is to receive  a salary of $17000 per annum in addition to a bonus of 20% of the trading profit after his salary and both partner’s interest have been deducted.
• Any remaining profit/losses are to be shared equilly.
• The following information is available for the year ended 31st December 2018.
• Fixed Capital Accounts:
  
• A   1 January 2018 $28,000 Cr
• B 1 January 2018 $72,000 Cr
  
• Additional fixed capital brought in by A on 1st July 2018 $10,000
  
• Current accounts and drawing details are as follows
• A   1 January 2018 $1530  Cr
  
• B 1 January 2018 $1640 Cr
  
• Drawings detail
• A   1 January 2018 $40,000        Dr. 
  
• B 1 January 2018 $20,000        Dr.
  
• The trading profit for the year ended 31 December 2018, before taking any of the above details and information into account, was $60,300.

Answer 1

Solution:

1.). Profit and loss appropriation account for the year ended 31 December 2018:

Partner A capital = Opening capital + additional capital

Partner A capital = 28,000 + 10,000 = $38,000

Partner B capital = $72,000

Note that we have not been given the interest on drawings, therefore, it will be nil.

 

The profit and loss Appropriation account and current accounts of the partners for the year ended 31 December 2018 is attached below: