Answered: Michael and George have been in…

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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Question

Michael and George have been in partnership for several years, sharing profits and losses in the ratio 3:4. At 1 January they had the following credit balances on their capital and current accounts: Capital $ Current $ Michael 65,000 11,486 Donald 80,000 9,637 The partnership statement of profit or loss for the year to 31 December shows a net profit of $28,595, and the partners had made drawings of $16,500 each.

Required:
Calculate the balance of Michael’s current account at 31 December.

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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