i. Interest on drawings in respect of the current financial year, the interest amounted to K500o for Shumba and K1000 for Shula. An investigation indicated that credit losses could be K4000 during the next financial period and the allowance for credit losses must be adjusted accordingly. Prepare: a) An income statement for the year ended 28 February 2002; b) Statement showing changes in the equity of the partnership for the year ended 28 February 2002. NB: Show all calculations.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
![Question
Shumba and Shula are in partnership. The terms of their partnership agreement
iii.
Interest on drawings in respect of the current financial year, the interest
are as follows:
amounted to K500o for Shumba and K1000 for Shula.
1. Interest is to be calculated on the opening balances of both the capital and
An investigation indicated that credit losses could be K4000 during the next
current accounts at the rates of 7.5% and 10% p.a. respectively.
2. Shula is entitled to a monthly salary of K1250
3. Profit/losses are to be shared equally.
financial period and the allowance for credit losses must be adjusted accordingly.
Prepare:
4. Interest on drawings, as per partners' decision.
a) An income statement for the year ended 28 February 2002;
b) Statement showing changes in the equity of the partnership for the year
The information below relates to the business activities of the partnership for the
ended 28 February 2002.
year ended 28 February 2002.
NB: Show all calculations.
Balances as at 28 February 2002
K'000
Inventory
Debtors control
135
82
Bank (Dr)
98
Motor vehicles at cost
99
Land and buildings at cost
Accumulated depreciation: Motor vehicles (1 March 2001)
Trading account (gross profit for the year)
Allowances for credit losses (1 March 2001)
Administration expenses
Capitals: Shumba (fixed)
100
49
200
1
80
240
Shula (fixed)
160
Current accounts: Shumba (Cr. 1 March 2001)
Shula (Dr. 1 March 2001)
50
40
Drawings: Shumba
Shula
55
11
Additional information:
i.
Credit losses should amount to K2000
ii.
Depreciation on motor vehicles. Provide for 30% p.a. according to the
diminishing-balance method.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F65245f16-8aae-41f2-8aa1-c2ce62cd2a4a%2F181b82ee-dde3-4b22-9f1e-b780b57b7629%2F47oyz9g_processed.png&w=3840&q=75)
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