Chapter 12, Problem E12.18E

To determine

Accounting for allocation of income and closing the withdrawals accounts:

The Accounting forallocation of income among partners shall be initiated through preparation of statement which reflects the allocation of income. The partnership agreement may provide for salary, interest and sharing ratio. In such cases, firstly allowance for salary shall be provided among the partners and then interest shall be allocated among the partners on the basis of rate and capital balances of partners in the beginning of the year. The net amount remaining shall be distributed among the partners on the basis of sharing ratio.

The total share of income shall be computed by adding up all the three components as mentioned above for each respective partners and then entry is made by debiting the income summary and crediting the partners capital account for the respective amount of share of total profits.

The Withdrawals made during the year has been placed in the temporary account by the name of respective partner withdrawal account. The same need to be closed at the end of the year by transferring it to respective partners capital account by debiting the capital account and crediting the temporary account of withdrawals opened.

Requirement1:

TheJournal for closing the net income of firm.

To determine

Requirement2:

The Journal entry for closing the withdrawals accounts.

To determine

Requirement3:

The Ending balance of capital account to be computed.