Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)

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FA – Nov 2024 – L1 – Q1 – Partnership Financial Statements

Prepare the profit or loss and appropriation account and financial position statement for a partnership at retirement and admission of partners.

Question

Atsu, Baba, and Chawe are in partnership, providing management services, sharing profits in the ratio 5:3:2 after charging annual salaries of GH¢18,000 each. Current accounts are not maintained. On 30 June 2024, Atsu retired.

Dua was admitted on 1 July 2024 to the partnership and is entitled to 30% of the profits of the current partnership, with the balance being shared equally between Baba and Chawe.

The previous partnership trial balance as of 30 June 2024 was as follows:

Description	GH¢	GH¢
Capital accounts – Atsu		12,519
Capital accounts – Baba		65,844
Capital accounts – Chawe		33,618
Trade receivables	138,615
Inventories at 1 July 2023	6,000
Operating expenses	419,166
Investment	300
Bank overdraft		33,510
Trade payables		52,218
Revenue		565,296
Total	663,543	663,543

Additional Information:

Inventory remains at GH¢6,000.
Full provision is required for an irrecoverable debt of GH¢3,450.
Adjustments agreed by partners:
- The investment is to be included at GH¢4,500.
- Goodwill, which remains in the books, is valued at GH¢72,000.
On 1 July 2024, GH¢30,000 due to Atsu was transferred to Dua. The balance due to Atsu is to be repaid over three years, commencing on 1 July 2024.
Dua introduced cash of GH¢22,500 to the partnership.

Required:
i) Prepare the statement of profit or loss and appropriation account of the previous partnership for the year ended 30 June 2024 and a statement of financial position at that date. (9 marks)
ii) Prepare the statement of financial position for the current partnership as of 1 July 2024. (6 marks)

Answer

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Tags: Appropriation, Capital Accounts, Financial Position, Goodwill, Partnership, Profit or Loss
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: Nov 2024

FR – May 2017 – L2 – SB – Q3 – Partnership Account

Advise Bode Limited on accounting treatment for impairment, borrowing costs, and reclassification to investment property in accordance with IAS 36, IAS 23, and IAS 40.

Question

You are a financial reporting consultant. The management of Bode Limited, a well-diversified company with branches in all states of the federation, has some transactions for which it requires advice. Bode Limited has a financial accountant who is not yet a qualified accountant. These transactions are as follows:

Impairment of Assets: Bode Limited recognized a cash-generating unit during the year ended December 31, 2015, comprising:
- Property, plant, and equipment: N4,050 million
- Goodwill: N450 million
- Other assets: N2,700 million
  Total carrying amount: N7,200 million
The management estimated the recoverable amount of the cash-generating unit at N6,300 million as of December 31, 2015. The financial accountant understands some provisions of IAS 36 on asset impairment but is uncertain about how to allocate impairment across these assets within the unit.
Borrowing Costs: On January 1, 2015, Bode Limited borrowed N300 million to fund the construction of two assets, expected to take a year to complete. The funds were drawn on January 1 and were allocated as follows, with the remaining funds invested temporarily:
- Asset X: N50 million on January 1, N50 million on July 1
- Asset Y: N100 million on January 1, N100 million on July 1
  The loan interest rate is 9% per annum, and surplus funds can be invested at a rate of 7% per annum.
Investment Property Reclassification: The company’s head office in Abuja, previously owner-occupied, was vacated and let out on June 30, 2015, due to a cost-saving decision to move operations to a nearby branch office. The property, initially recognized under IAS 16 at a cost of N37.5 million with a 50-year useful life, was revalued to N52.5 million by an independent valuer as of December 31, 2015. Bode Limited’s accounting policy for investment properties is to use the fair value model.

Required:
Write a memo advising Bode Limited on the accounting treatments for each transaction in their financial statements. Provide relevant calculations where necessary.

Answer

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Tags: Borrowing Costs, IAS 23, IAS 36, IAS 40, Impairment of Assets, Investment Property

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2017

FA – May 2012 – L1 – SB – Q2 – Partnership Accounts

Partnership business dissolution with the necessary ledger accounts.

Question

Tap, Sea, Air, and River are in partnership business sharing profits and losses in the ratio 8:5:4:3, respectively. Their Statement of Financial Position was as follows as at 1 January 2009:

On the date of the statement, the business was brought to an end, and the assets realized as follows:

Assets Realized	N’000
Motor Vehicles	60,000
Plant and Machinery	60,000
Furniture and Fittings	52,500
Inventories	15,300
Accounts Receivable	9,450

Dissolution expenses amounted to N22,500,000. Air became bankrupt and could only pay 40k for every N100 owed. The other partners were solvent, and the amount was collected from Air’s administrator. Cash was returned to or received from partners as appropriate.

You are required to:
(a) State the ways in which the amount owed by Air will be absorbed by the other partners. (3 Marks)
(b) Show the necessary ledger accounts to close the partnership’s books.

Answer

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Tags: Dissolution, Ledger Accounts, Partnership Business
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2012

FA – May 2012 – L1 – SA – Q8 -Partnership Accounts

Identifying actions taken during the admission of a partner.

Question

Which of the following is NOT an action for admission of a partner during the year?

A. Preparing the financial statements up to the date of admission
B. Determining goodwill, if any, at that date
C. Preparing a statement of account
D. Preparing a statement of financial position
E. Partners will decide if goodwill should be maintained in books or not.

Answer

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Tags: Financial Statements, Goodwill, Partnership
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2012

FA – May 2012 – L1 – SA – Q6 – Partnership Accounts

Calculating the value of goodwill in a partnership.

Question

The profits of ABC Partnership firm for 5 years ended 31 December 2011 were as follows:

Year Profits
2007 N15,000,000
2008 N9,000,000
2009 N4,500,000
2010 N7,500,000
2011 N10,500,000

The firm intends to admit a new partner on 1 January 2012. What is the value of goodwill where the partners have decided to value goodwill at 4 years’ purchase of the average super profit over the last 5 years based on normal profits of N3,000,000 per annum?

A. N6,300,000
B. N9,300,000
C. N25,200,000
D. N25,300,000
E. N25,350,000.

Answer

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Tags: Goodwill, Partnership Valuation, Super Profit Method
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2012

FA – Nov 2011 – L1 – SB – Q4 – Partnership Accounts

This question addresses the partnership agreement terms and dispute resolution between partners.

Question

Segun and Sola went into partnership on 1 January 2009. The partnership agreement specifies that both partners should maintain Capital Accounts without Current Accounts. Each partner will be entitled to salary of N240,000 per annum and interest of 10% on capital at the end of the year. Profits and losses are to be shared equally after salaries and interest on capital have been taken into account.
Sola introduced capital of N1,000,000 on 1 January 2009 and N200,000 on 1 January 2010. He withdrew N360,000 from the business in 2009 and N480,000 in 2010.
Segun introduced capital of N400,000 on 1 January 2009. He withdrew N105,000 from the business in 2009 and N161,200 in 2010. The partnership did not keep proper books of accounts in 2009 and 2010.

However, the assets and liabilities of the partnership for the two years ended 31
December 2010 are as follows:

You are required to
Prepare in vertical format, the comparative Balance Sheets and Capital Accounts of the partners at the end of 2009 and 2010 based on the above information.

Answer

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Tags: Partnership Accounting, Partnership Agreement
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: NOV 2011

FA – Nov 2011 – L1 – SA – Q9 – Partnership Accounts

This question asks about the major difference between the income statement of a partnership and that of a sole trader.

Question

What is the major difference between the income statement of a partnership and that of a sole trader?

Answer

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Tags: Partnership Accounting, Sole Trader Accounting
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: NOV 2011

FA – Nov 2011 – L1 – SA – Q9 – Partnership Accounts

This question asks how the cost of raw materials consumed is calculated in a manufacturing account.

Question

Which of the following formulae determines the cost of raw materials consumed in a Manufacturing Account?
A. Opening stock plus purchases less closing stock
B. Purchases plus closing stock less opening stock
C. Cost of raw materials available plus closing stock
D. Cost of raw materials available plus opening stock
E. Opening stock plus net purchases less closing stock

Answer

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Tags: Cost of Raw Materials, Manufacturing Account
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: NOV 2011

FA – Nov 2011 – L1 – SA – Q5 – Partnership Accounts

Partnership Accounting, Profit Sharing

Question

What is A’s share of profit?
A. N76,000
B. N76,200
C. N76,267
D. N76,300
E. N80,000

Answer

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Tags: This question calculates a partner’s share of the profit in a partnership.
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: NOV 2011

FA – Nov 2011 – L1 – SA – Q4 – Partnership Accounts

This question calculates the profit share between partners.

Question

What is the profit to be shared by the partners for the year?
A. N104,000
B. N108,000
C. N114,400
D. N120,000
E. N126,000

Answer

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Tags: Partnership Accounting, Profit Sharing
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: NOV 2011

FA – May 2013 – L1 – SA – Q35 – Partnership Accounts

This question asks for a partner’s share of the profit or loss on realisation.

Question

What is Hassan’s share of profit or loss on realisation?

Answer

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Tags: Partnership, Profit Sharing, Realisation Profit
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2013

FA – May 2013 – L1 – SA – Q34 – Partnership Accounts

This question asks for the calculation of profit or loss on realisation in a partnership.

Question

Calculate the profit or loss on realisation attributable to the partnership.

Answer

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Tags: Partnership, Realisation Profit
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2013

FA – May 2013 – L1 – SA – Q33 – Partnership Accounts

This question tests the double-entry treatment when a partner introduces a non-current asset into a partnership.

Question

When a partner introduces a non-current asset into a partnership business, the accounting entries will be:

Answer

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Tags: Double Entry, Non-Current Asset, Partnership
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2013

FA – May 2013 – L1 – SA – Q16 – Partnership Accounts

This question tests the knowledge of accounts kept by a partnership.

Question

Which of the following accounts will NOT be kept by a partnership?

A. Statement of Financial Position
B. Current Account
C. Realisation Account
D. Statement of Profit or Loss and other comprehensive income
E. Income and Expenditure Account

Answer

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Tags: Financial Reporting, Partnership Accounts
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2013

FA – May 2013 – L1 – SA – Q15 – Partnership Accounts

This question is about calculating the balance on a partner’s current account.

Question

How much will be the balance on Emeka’s current account after adjusting for his share of profit, salary, and drawings?

A. N272,800
B. N302,400
C. N327,800
D. N352,800
E. N372,800

Answer

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Tags: Current Account, Partner’s Drawings, Profit Sharing
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2013

FA – May 2013 – L1 – SA – Q14 – Partnership Accounts

This question is about the profit share of a partner.

Question

Bola, Emeka, and Sule are partners trading under the name BES Enterprises. They share profits or losses in the ratio of 3:2:1 respectively. The partnership made a net profit of N840,000 for the year ended 30 April 2013. What is Bola’s share of profit?

A. N300,200
B. N360,200
C. N361,000
D. N361,200
E. N362,100

Answer

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Tags: Financial Reporting, Partnership, Profit Sharing
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2013

FA – May 2014 – L1 – SB – Q4 – Partnership Accounts

Admission of a new partner, profit sharing, and preparation of capital and current accounts.

Question

Biggy and Smallie were in partnership, sharing profits and losses in the ratio 2:1. They agreed to admit Fanny into the partnership from 1 January 2012. Fanny is to introduce N140,000, out of which N130,000 is to be his fixed capital. He is to receive a commission of N30,000 per annum in addition to a share of profit. The new profit-sharing ratio is 2:2:1 to Biggy, Smallie, and Fanny, respectively. Other provisions of the Partnership Deed are:

(i) Debit balance in current accounts at the beginning of the year is to attract 5% interest.
(ii) Goodwill is valued at N150,000. No account for goodwill is to be retained in the partnership books.
(iii) Details of the existing partners’ fixed capital and current accounts for the purpose of the agreement are:

Partner	Fixed Capital (N)	Current Account (N)
Biggy	360,000	100,000
Smallie	240,000	(60,000) DR

(iv) The draft final accounts for the year ended 31 December 2012, before taking into account Fanny’s commission and interest on partners’ current accounts, revealed a profit of N347,000.
(v) The drawings made by the partners are:

Partner	Drawings (N)
Biggy	95,000
Smallie	45,000
Fanny	73,900 (including commission)

You are required to prepare:

a. A statement showing the sharing of profit for the year ended 31 December 2012. (5 Marks)
b. The Partners’ capital and current accounts for the year ended 31 December 2012. (10 Marks)

Answer

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Tags: Capital Accounts, Current Accounts, Partnership Admission, Profit Sharing
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2014

FA – May 2014 – L1 – SA – Q12 – Partnership Account

This question tests knowledge of the term used when multiple partnerships combine to form a new partnership.

Question

The process where two or more Partnerships combine to form a new Partnership is known as…………………

Answer

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Tags: Accounting Terminology, Business Combinations, Partnership
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2014

FA – May 2014 – L1 – SA – Q11 – Partnership Account

This question tests knowledge of methods for calculating interim distribution payments during partnership dissolution.

Question

State TWO methods of calculating the interim distribution payments in piecemeal realisation of partnership business assets on dissolution.

Answer

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Tags: Dissolution, Distribution Methods, Partnership
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2014

FA – May 2014 – L1 – SA – Q19 – Partnership Account

Determines the correct balance for a partner's current account after adjustments.

Question

What is the correct balance carried forward in the current account of the partners as recorded by the inexperienced bookkeeper?
A. A debit balance of ₦3,060
B. A debit balance of ₦13,060
C. A credit balance of ₦13,060
D. A debit balance of ₦14,140
E. A credit balance of ₦14,140

Answer

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Tags: Balance Calculation, Bookkeeping, Current Account, Partnership
Level: Level 1