- 20 Marks
FA – L1 – Q80 – Preparation of Partnership accounts
Question
Djembo and Akwele were in partnership and shared profits and losses in the ratio of 3:2 respectively. The balances on the partners’ capital accounts at July 1 20X8 were: Djembo GH₵250,000, Akwele GH₵400,000.
Due to expansion of business, Eduvie was admitted as a partner on October 1, 20X8 under the following arrangements:
(i) Assets were revalued upwards by GH₵200,000 but the revaluation was not recorded in the books.
(ii) Goodwill of the firm was assessed at GH₵300,000 and was retained in the books.
(iii) Eduvie invested GH₵500,000 as capital.
(iv) Eduvie was allowed a monthly salary of GH₵20,000 whereas Djembo and Akwele continued to receive salaries of GH₵28,000 and GH₵25,000 per month respectively, as in the past.
(v) The balance profit was to be shared: Djembo 35%; Akwele 35% and Eduvie 30%.
(vi) Mr. Atikpui was hired as manager from October 1, 20X8 at a salary equal to 5% of the profit remaining after deducting such salary but before charging partners’ salaries.
The profit for the year ended June 30, 20X9 amounted to GH₵486,000 after:
(i) Making allowance for a debt of GH₵48,000 incurred prior to July 20X8; and
(ii) providing for the partners’ salaries.
In addition to salaries, the partners withdrew the following amounts:
Djembo GH₵150,000; Akwele GH₵120,000; and Eduvie GH₵90,000
Required:
Partners’ capital accounts for the year ended June 30, 20X9.
Answer
Partners’ Capital Accounts for the Year to June 30, 20X9
| Description | Djembo GH₵ | Akwele GH₵ | Eduvie GH₵ | Description | Djembo GH₵ | Akwele GH₵ | Eduvie GH₵ |
|---|---|---|---|---|---|---|---|
| Revaluation | 70,000 | 70,000 | 60,000 | Balance b/d | 250,000 | 400,000 | |
| Drawings: | Goodwill | 180,000 | 120,000 | ||||
| Salaries | 84,000 | 75,000 | 180,000 | Revaluation | 120,000 | 80,000 | |
| Bank | 500,000 | ||||||
| Share of profit: | |||||||
| First 3m | |||||||
| Salaries | 84,000 | 75,000 | |||||
| Profits | 78,300 | 52,200 | |||||
| Salaries | 180,000 | ||||||
| Profits | 107,550 | 107,550 | 92,186 | ||||
| Cash | 150,000 | 120,000 | 90,000 | ||||
| Balance c/d | 515,850 | 569,750 | 442,186 | ||||
| Total | 1,071,850 | 1,059,750 | 772,186 | Total | 1,071,850 | 1,059,750 | 772,186 |
- Tags: Capital accounts, Drawings, Financial Statements, Goodwill, Partnership accounts, Profit sharing, Revaluation, Salaries
- Level: Level 1
- Uploader: Samuel Duah