Accounting for partnership : Practice Questions

If a partnership agreement allows for interest on capital at $$5\%$$ per annum and Partner X has a capital balance of $$100,000$$, what is the interest on capital for Partner X?

Chris and David share profits and losses in the ratio 3:2. For the year ended 31 December 2023, the net profit before appropriations was $$150,000$$. Interest on drawings for Chris was $$2,000$$ and for David $$1,000$$. Interest on capital was $$10,000$$ for Chris and $$8,000$$ for David. What is Chris's share of the balance of profit?

During partnership dissolution, Partner X takes over inventory with a net book value of $$80,000$$ at an agreed value of $$70,000$$. Partner Y is entitled to a 5% commission on the collection of trade receivables totalling $$100,000$$, all of which are collected. What is the total impact on the debit side of the Realisation Account from these two transactions?

Andy and Betty are partners sharing profits equally. Their fixed capital balances are $$400,000$$ and $$200,000$$ respectively. According to their partnership agreement, interest on capital is allowed at 5% per annum. What is the total interest on capital for the year?

Which of the following items is usually debited to the Profit and Loss Appropriation Account?

State two common items that a partnership agreement should specify regarding the financial arrangements among partners.

Identify two items that would typically be debited to a partner's Current Account under the fluctuating capital method, excluding drawings.

In a general partnership, what is the key characteristic regarding partners' liability for business debts?

C and D are partners in a business, sharing profits and losses in the ratio of 1:1. The partnership agreement provides for the following:

• Interest on capital at 5% per annum.
• D is entitled to a salary of $$HK$$2,500 per month.

Their capital balances on 1 January 2023 were: C - $$HK$$120,000, D - $$HK$$80,000. During the year ended 31 December 2023, the net profit before any appropriations was $$HK$$110,000.

Required:
(a) Prepare the Profit and Loss Appropriation Account for the year ended 31 December 2023.
(b) Calculate the closing capital balances for C and D, assuming no drawings were made during the year other than what is appropriated.

Emily, Frank, and Grace are partners, sharing profits and losses in the ratio of 4:3:3. The net profit for the year ended 30 June 2024 was $$280,000$$. Their partnership agreement provides for the following:

• Interest on capital: Emily 6%, Frank 5%, Grace 5%. Capital balances are Emily $$400,000$$, Frank $$300,000$$, Grace $$200,000$$.
• Salaries to partners: Frank $$40,000$$ per annum, Grace $$30,000$$ per annum.
• Interest on drawings: Emily $$2,500$$, Frank $$1,800$$, Grace $$1,200$$.

On 1 July 2023, the current account balances were: Emily Cr $$15,000$$, Frank Dr $$8,000$$, Grace Cr $$10,000$$. During the year, Emily's drawings were $$45,000$$, Frank's drawings were $$35,000$$, and Grace's drawings were $$25,000$$.

Required:

(a) Prepare the Appropriation Account for the year ended 30 June 2024.

(b) Prepare the partners' Current Accounts in columnar form for the year ended 30 June 2024.