The Nikifa, Fatihah & Wakeel partnership was formed on 1 April 2021 with cash investments by the partners as follows: Nikifa, RM206,000; Fatihah, RM255,000 and Wakeel, RM220,000. Besides the cash, Nikifa and Fatihah also brought into the business RM33,000 worth of furniture and RM17,000 worth of motor vehicle respectively. The partnership’s income for the year amounting to RM192,500. Additional information: 1. Nikifa, Fatihah & Wakeel agree on annual salaries of RM7,100, RM8,400 and RM6,300 respectively. 2. The profit-sharing ratio of the partnership are to be determined based on capital balance at the beginning of the year. REQUIRED: (a) Prepare journal entries for initial investments by Nikifa, Fatihah & Wakeel. (b) Calculate and determine the partnership profits that should be received by each partner. (c) Explain the concept of unlimited personal liability of a partnership
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.
Q3
The Nikifa, Fatihah & Wakeel partnership was formed on 1 April 2021 with cash investments
by the partners as follows: Nikifa, RM206,000; Fatihah, RM255,000 and Wakeel, RM220,000.
Besides the cash, Nikifa and Fatihah also brought into the business RM33,000 worth of
furniture and RM17,000 worth of motor vehicle respectively. The partnership’s income for the
year amounting to RM192,500.
Additional information:
1. Nikifa, Fatihah & Wakeel agree on annual salaries of RM7,100, RM8,400 and
RM6,300 respectively.
2. The profit-sharing ratio of the partnership are to be determined based on capital balance
at the beginning of the year.
REQUIRED:
(a) Prepare
(b) Calculate and determine the partnership profits that should be received by each partner.
(c) Explain the concept of unlimited personal liability of a partnership
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