- 20 Marks
FA – L1 – Q83 – Preparation of Partnership accounts
Define books of prime entry and list four examples.
Question
(a) (i) Define book of prime entry.
(ii) Mention any four (4) books of prime entry.
(b) Farida, Jibril, and Esther are in partnership sharing profits and losses in the ratio of 5:3:2 respectively. According to the partnership agreement, partners’ capital accounts attract an interest of 20% per annum, while any drawings by a partner also attract 10% interest per annum.
The following trial balance has been extracted after the preparation of the statement of profit or loss for the period ending 31st December, 20X9.
| Debit | GH¢ | Credit | GH¢ |
|---|---|---|---|
| Building | 55,000 | Capital – Farida | 50,000 |
| Furniture and Fittings | 20,000 | Capital – Jibril | 30,000 |
| Motor vehicle | 45,000 | Capital – Esther | 20,000 |
| Inventory | 20,000 | Payables | 25,000 |
| Receivables | 20,000 | Loan – Esther | 20,000 |
| Cash and bank | 35,000 | Current account – Farida | 2,000 |
| Current account – Jibril | 5,000 | Profit for the year | 60,000 |
| Current account – Esther | 10,000 | ||
| Total | 210,000 | Total | 210,000 |
The following entries have not been recorded in the books:
(i) Salary of GH¢5,000 was paid to Esther during the period.
(ii) Farida personally paid general expenses of GH¢2,500 on behalf of the partnership.
(iii) Cash drawings made by partners: Farida GH¢500, Jibril GH¢1,500, and Esther GH¢1,200.
(iv) Interest on loan – Esther – GH¢2,000.
(v) Jibril took goods worth GH¢2,000 for personal use.
(vi) Interest on capital account. All capital accounts were to remain fixed.
You are required to prepare:
(i) Profit or loss and appropriation account.
(ii) Partners’ current account.
(iii) Farida, Jibril, and Esther Partnership
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