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Homework answers / question archive / accounts Gifty and Linda are in partnership sharing profits and losses in the ratio 7:3 respectively
accounts Gifty and Linda are in partnership sharing profits and losses in the ratio 7:3 respectively. The following information has been taken from the partnership records for the financial year endas 31 May 20X9. Partners' capital account balances: Gifty GHS200,000 Linda GHS140,000 Partners' current accounts, balances as at 1 June 20X8: Gifty GHS15,000 Cr Linda GHS13,000 Cr During the year ended 31 May 20x9 the partners made the following withdrawals from the partnership bank account. Gifty GHS10,000 on 31 August 20x8 GHS10,000 on 30 November 20X8 GHS10,000 on 28 February 20X9 GHS10,000 on 31 May 20X9 Linda GHS7,000 on 31 August 20x8 GHS7,000 on 30 November 20x8 GHS7,000 on 28 February 20X9 GHS7,000 on 31 May 20X9 Interest is to be charged on drawings at the rate of 12% per annum. Interest is allowed on capital accounts and credit balances on current accounts at the rate of 12% per annum. Linda is to be allowed a salary of GHS15,000 per annum The net profit of the partnership for the year ended 31 May 20x9 is GHS102,940. Required (a) Calculate of the amount of interest chargeable on each partner's drawings for the year ended 31 May 20X9. (b) Produce the partnership appropriation account for the year ended 31 May 20X9. (c) Calculate the balance on each partner's current account as at 31 May 20X9.
a)
| Computation of Interest on Drawings | ||||
| Gfty | ||||
| Date of Drawings | Amount GHS | Computation | Interest on Drawings( GHS) | |
| 31-08-18 | 10,000.00 | (10000*12%*(9/12)) | 900.00 | |
| 30-11-18 | 10,000.00 | (10000*12%*(6/12)) | 600.00 | |
| 28-02-19 | 10,000.00 | (10000*12%*(3/12)) | 300.00 | |
| 31-05-19 | 10,000.00 | (10000*12%*(0/12)) | - | |
| Total | 1,800.00 | |||
| Linda | ||||
| Date of Drawings | Amount GHS | Computation | Interest on Drawings( GHS) | |
| 31-08-18 | 7,000.00 | (10000*12%*(9/12)) | 630.00 | |
| 30-11-18 | 7,000.00 | (10000*12%*(6/12)) | 420.00 | |
| 28-02-19 | 7,000.00 | (10000*12%*(3/12)) | 210.00 | |
| 31-05-19 | 7,000.00 | (10000*12%*(0/12)) | - | |
| Total | 1,260.00 |
*In computation column 10000 is the amount of withdrawel 12% is the rate of interest 9,6,3,0 is the period balance after the drawings and 12 is the months in an year
b)
| Partnership Appropreation Account for the year ended 31-05-2019 | |||
| Particulars | Amount GHS | Particulars | Amount GHS |
| To interest on capital | By Net profit | 102,940.00 | |
| Gifty (200000*12/100) | 24,000.00 | By Interest on Drawings | |
| Linda (140000*12/100) | 16,800.00 | Gifty | 1,800.00 |
| Linda | 1,260.00 | ||
| To Interest on Current account | |||
| Gifty (15000*12/100) | 1,800.00 | ||
| Linda (13000*12/100) | 1,560.00 | ||
| To Salary (linda) | 15,000.00 | ||
| To linda's Capital (46840*3/10) | 14,052.00 | ||
| To Gifty's Capital (46840*7/10) | 32,788.00 | ||
| 106,000.00 | 106,000.00 |
* 46840 is the balance in appropreation account
Note
I assumed that interest on current account is to be computed on opening credit balance of current account
c)
| Balance of current account | ||
| Particulars | Gifty (GHS) | Linda (GHS) |
| Opening | 15,000.00 | 13,000.00 |
| Add: | ||
| Interest on Capital | 24,000.00 | 16,800.00 |
| Interest on Current account | 1,800.00 | 1,560.00 |
| Salary | - | 15,000.00 |
| Profit and loss appropreation | 32,788.00 | 14,052.00 |
| Less: | ||
| Interest on Drawings | 1,800.00 | 1,260.00 |
| Balance as on 31-05-2019 | 71,788.00 | 59,152.00 |
