John and Jane are in partnership sharing profits and losses in the ratio 3:1. Interest is allowed at 5% on their capital balances and interest on drawings is charged as follows; John Tshs.120,000; Jane Tshs.130,000. The partnership agreement provides salaries to partners for the whole year as follows; John Tshs.1,200,000; Jane Tshs. 960,000. The trial balance as at 30th June, 2017 is as shown below; JOHN AND JANE TRIAL BALANCE AS AT 30 JUNE, 2017 Capital account - John Dr Cr 5,200,000 Capital account - Jane 6,400,000 Current account - John 230,000 Current account - Jane 310,000 Drawings - John 72,000 Drawings - Jane 48,000 Stocks 1 July, 2016 2,820,000 Purchases/ sales 12,935,000 22,740,000 Return inwards 120,000 Debtors/creditors 820,000 730,000 Insurance 275,000 Rent 360,000 Bank 5,300,000 Carriage inwards 150,000 Carriage outwards 210,000 Motor van 12,500,000 35,610,000 35,610,000 Additional information: i) Stocks on 30th June, 2017 were Tshs.2,575,000. ii) Accrued insurance amounted to Tshs.120,000 as at 30th June, 2017 iii) Prepaid rent was Tshs.90,000 as on 30th June, 2017. iv) Motor van is to be depreciated at 25% on cost on straight line basis. Required; Prepare for John and Jane partnership the following statements for year ended 30th June, 2017. a) Income statement and appropriation account b) Balance sheet

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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John and Jane are in partnership sharing profits and losses in the ratio 3:1. Interest is allowed at 5% on their capital balances and interest on drawings is charged as follows; John Tshs.120,000; Jane Tshs.130,000. The partnership agreement provides salaries to partners for the whole year as follows; John Tshs.1,200,000; Jane Tshs. 960,000. The trial balance as at 30^th June, 2017 is as shown below;

JOHN AND JANE TRIAL BALANCE AS AT 30 JUNE, 2017
Capital account - John	Dr	Cr
	5,200,000
Capital account - Jane		6,400,000
Current account - John		230,000
Current account - Jane		310,000
Drawings - John	72,000
Drawings - Jane	48,000
Stocks 1 July, 2016	2,820,000
Purchases/ sales	12,935,000	22,740,000
Return inwards	120,000
Debtors/creditors	820,000	730,000
Insurance	275,000
Rent	360,000
Bank	5,300,000
Carriage inwards	150,000
Carriage outwards	210,000
Motor van	12,500,000
	35,610,000	35,610,000

Additional information:

i) Stocks on 30^th June, 2017 were Tshs.2,575,000.

ii) Accrued insurance amounted to Tshs.120,000 as at 30^th June, 2017

iii) Prepaid rent was Tshs.90,000 as on 30^th June, 2017.

iv) Motor van is to be depreciated at 25% on cost on straight line basis.

Required;

Prepare for John and Jane partnership the following statements for year ended 30^th June, 2017.

a) Income statement and appropriation account

b) Balance sheet

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

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