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Homework answers / question archive / Asha and Rasha started partnership busines in 2010 sharing profit and losses in the ratio of 60% and 40% respectively
Asha and Rasha started partnership busines in 2010 sharing profit and losses in the ratio of 60% and 40% respectively. The following is the trial balance of the partnership firm, which has been extracted as on 31 December 2019: Dr ($) Cr(s) Land 50,000 Building 40,000 Plant and Machinery 30,000 Sales 200,000 Sales Return 1,000 Purchase 75,000 Purchase Return 500 Inventory (on 1 January 2019) 11,500 Salaries 24,000 Discount Received 2,500 Rent Received 10,000 I Discount Allowed 3,000
Enable Editing contain viruses. Unless you need to edit it's safer to stay in Protected View Bank Loan 25,000 Loan from a Partner - Rasha 6,000 Interest on Bank Loan 2,500 Bad Debts 250 Allowance for Bad Debts 800 Accounts Receivable 25,000 Accounts Payable 11,500 Cash at bank 22,000 Cash in Hand 2,000 Insurance 4,000 General Expenses 5,000 Capital Account: Asha 50,000 Rasha 20,000 1 Drawings during the year: Asha 12,000 Rasha 20,000 Current Account: Asha 2,500
Cash in Hand 2,000 Insurance 4,000 General Expenses 5,000 Capital Account: Asha 50,000 Rasha 20,000 Drawings during the year: Asha 12,000 - Rasha 20,000 Current Account: - Asha 2,500 - Rasha 1,550 328,800 328,800 The following information is relevant: I Closing inventory as on 31/12/2019 is valued at $8,000
provision for bad debts is to be created 8% of Trade Receivables Insurance amount included prepayment for 2020 $500 Salary outstanding (accrual) as on 31/12/2019 is $2,000 Interest on loan given by Rasha (Partner) is not provided in the partnership agreement The following is provided in the partnership agreement: Interest on drawings at 10% per annum Interest on Capital at 8% per annum Salary to Asha $5000 and to Rasha $8,000 per annum You are required to prepare: a) Income Statement b) Profit and Loss Appropriation Account (Statement of division of Income) c) Partners' Capital Account in columnar form d) Partners' Current Accounts in columnar form, and e) A Statement of Financial Position (Balance Sheet) as at 31/12/2019 (12 Marks) Note: you are required to perform all relevant accounting entries relating to Interest on Capital Account, Interest on Drawings, Salary to partners with regards to preparation of partnership business.
Explanation -
1. Closing Entries will be considered in the income statement as a negative value and add to the balance sheet current assets.
2. Bad Debts 8% on $25,000 = $2,000 (Already available balance is $800 hence only $1,200 will be charged to income statement.
3. $500 will be deducted from insurance expense and added to the Current Assets.
4. Salary payable will be added to the income statement and in the current liabilities.
5. Interest on drawings, capital, and salary will be applied to the appropriation account. Also consider as paid to the partners and receipt according to the transaction.
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