The following must be taken into account: (1) On 29 February 2020 the Profit and Loss account reflected a net profit of R800 000. (2) The partners are entitled to interest at 15% p.a. on their capital balances. Note: Ashwin increased his capital contribution by R200 000 on 01 September 2019. The capital change has been recorded. (3) The partners are entitled to the following monthly salaries for the first six months of the financial year. Ashwin R15 000 Tony R20 000 From 01 September 2019, the partners will be entitled to monthly salaries of R24 000 each. (4) Tony is entitled to a bonus equal to 10% of the net profit before any of the above appropriations have been taken into account. (5) The remaining profit/shortfall must be shared equally between Ashwin and Tony.
The following must be taken into account: (1) On 29 February 2020 the Profit and Loss account reflected a net profit of R800 000. (2) The partners are entitled to interest at 15% p.a. on their capital balances. Note: Ashwin increased his capital contribution by R200 000 on 01 September 2019. The capital change has been recorded. (3) The partners are entitled to the following monthly salaries for the first six months of the financial year. Ashwin R15 000 Tony R20 000 From 01 September 2019, the partners will be entitled to monthly salaries of R24 000 each. (4) Tony is entitled to a bonus equal to 10% of the net profit before any of the above appropriations have been taken into account. (5) The remaining profit/shortfall must be shared equally between Ashwin and Tony.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
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Transcribed Image Text:The following must be taken into account:
(1) On 29 February 2020 the Profit and Loss account reflected a net profit of R800 000.
(2) The partners are entitled to interest at 15% p.a. on their capital balances.
Note: Ashwin increased his capital contribution by R200 000 on 01 September 2019. The capital
change has been recorded.
(3) The partners are entitled to the following monthly salaries for the first six months of the financial year:
Ashwin R15 000
Tony R20 000
From 01 September 2019, the partners will be entitled to monthly salaries of R24 000 each.
(4) Tony is entitled to a bonus equal to 10% of the net profit before any of the above appropriations have
been taken into account.
(5) The remaining profit/shortfall must be shared equally between Ashwin and Tony.
Transcribed Image Text:QUESTION 5
REQUIRED
Use the information provided below to prepare the Statement of Changes in Equity of Ashton Traders for the
year ended 29 February 2020. Use the following format:
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 29 FEBRUARY 2020
Capital Accounts
Ashwin (R)
Tony (R)
Total (R)
Balance at 28 February 2019
Changes in capital
Balance at 29 February 2020
Current Accounts
Ashwin (R)
Tony (R)
Total (R)
Balance at 28 February 2019
Net profit for the year
Interest on capital
Salaries
Bonus
Profit Share
Drawings
Balance at 29 February 2020
INFORMATION
Ashwin and Tony are partners in a business trading as Ashton Traders. The following information is available
for the financial year ended 29 February 2020:
Extract from the ledger of Ashton Traders as at 29 February 2020
Debit
Credit
R
R
Capital: Ashwin
600 000
Capital: Tony
400 000
Current alc: Ashwin (01 March 2019)
40 000
Current alc: Tony (01 March 2019)
30 000
Drawings: Ashwin
400 000
Drawings: Tony
500 000
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