Competency 10'0

Prepares Financial Statements of a Partnership Business

Prepared by Anthony Peiris

Compentancy Level 10.1

Explain’s Legal Envrionment of a Partnership Business

In this chapter we shall first examine some of the general characteristics of partnership the
reasons for their existence, legal requirement of a partnership, the partnership agreement,
accounting for partnership, formation and the preparation of financial statements for
partnership will be discussed.

Definition of a Partnership
As per partnership ordinance of 1890 a partnership business is “the relation which subsists
between persons carrying on a business in common with a view of profit. However four
attributes are necessary for a business partnership.
1. Profit orientation.
2. Participation of two or a group of persons.
3. Relationship among the partners.
4. Having a business activity.

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Other Characteristics of a Partnership

1. Mutual agency
In a partnership, every partner is an agent for the firm. An agent is a person who has the
authority to act for another. Thus each partner has the authority to enter into and bind the
partnership, and therefore all the partners, to any contract within the apparent scope of the
business. For example a partner in a grocery store can bind the partnership to contracts to
purchase goods, hire employees, lease a building and borrow money. These activities are
all within the normal scope of a grocery business.

2. Unlimited liability
Each partner is individually, and jointly liable to creditors for debts incurred by the
partnership. A creditor‟s claim on the partnership would be satisfied by the assets of the
partnership, but if these assets are insufficient to pay the claim, each partner‟s personal
assets may be used to meet the claim.

3. Limited life
However it is important to note that even though a change membership means an end to
the old partnership, the business may be continued by the formation of a new partnership.

4. Co-ownership of property
The property invested in a partnership by a partner becomes the property of all the
partners jointly. Upon dissolution of the partnership and distribution of its assets the
partner‟s claims against the assets are measured by the amount of the balances in their
capital accounts.

5. Non taxable entity

Unlike companies partners of a partnership are required to pay income taxes in their
names. Partnership does not pay such taxes directly to the government. Nevertheless the
individual partners are required to pay income taxes on their respective shares of
partnership profits.

6. Sharing of profits and losses.

The profits earned or the losses incurred by the partnership may be shared by the partners
in any ratio which they have agreed upon. According to section 24 of the partnership of
1890 in the absence of an agreed ration profits and losses but are shared equally by all
partners, irrespective of their individual capital contributions.

Legal Frame Work for Partnerships

Since there is no separate Sri Lankan Partnership Act all partnerships in Sri Lanka are
governed primarily by the law contained in the British Partnership Act 1890. In addition,
some aspects of partnerships are subject to certain clauses or provisions in several other
parliamentary acts and ordinances.

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They are:
1) The partnership act of 1890 (U.K)
The partnership businesses of Sri Lanka are governed by this act in all respects.

2) The prevention of frauds Ordinance of 1840

Section 18 of this ordinance requires all partnerships in Sri Lanka with an initial capital of
over Rs.1,000/- to have their agreements in writing and signed by all partners.

3) The registration of business Names Ordinance of 1918.

A business name which does not consist of the true full name of the owners has to be
registered with the Registrar of business Names giving the required particulars.

4) 2007 new Company Act Section 519

By the provisions of the Companies Act the maximum number of persons who may
comprise a partnership is limited to twenty.

Methods of Continuing Partnership Business

1) By oral agreement
This is a method in which a partnership is formed by words spoken. This method is not
deemed to be so appropriate to form a partnership since the partners find absolutely
difficult to sort out the conflicts among the partners in the absence of a written agreement.

2) By implication
This is where a group of people, who act together for a considerable longer period, make
the others understand that, they have formed themselves into a partnership.

3) By a written agreement
This is the most appropriate method for having a partnership business as this is legally
enforceable. As per the section 07 of 1840, prevention of frauds ordinance if the initial
capital is more than Rs. 1,000 forming the partnership by way of a written agreement is
mandatory.

The Partnership Agreement

A partnership is a voluntary association based on the contractual agreement between or

among legally competent people. The contract between the parties is referred to as the
partnership agreement or deed, or the articles of partnership.

This partnership agreement should include clauses detailing the important matters such as the
following.
1. Name of the partnership business.
2. Names and addresses of the partners.
3. Address of the main office.

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4. Period of the partnership.
5. Activity of the partnership.
6. Contribution method of the capital.
7. Method of sharing profits.
8. The fact whether the partners are entitled for salaries, if so the amounts.
9. The fact whether the partners are entitled for interest in capital, if so, the amounts or the
rates.
10. Rights and responsibilities of the partners.
11. How a new partner is admitted.
12. How an existing partner is departed.
13. How the goodwill is computed and the instances.
14. Any other matter which the partners consider are relevant.

Section 24 of the Partnership Act 1890

If the partnership agreement is silent on any matter relating to the rights and duties of the
individual partners then recourse will be made to the section 24 of the Partnership Act 1890.
These rules apply to all such matters of a partnership in so far as there is no agreement to the
contrary. These rules include the following,

1) In whichever ratio contributions to the capital may have been made, profits / losses must
be shared equally.
2) In respect of loan funds provided to the partnership business in addition to the capital, the
partner lending the capital is entitled to a minimum 5% annual interest on the loan.
3) While all partners must share in the administration of the business there is no entitlement
to a salary in respect of such assistance.
4) There is no entitlement to interest on the capital contribution.
5) In a partnership business, if a partner has spent his personal funds for business activities
he is entitled to be reimbursed.
6) All the partners are entitled to examine the accounts and to participate for the
management.
7) A new partner can be admitted only with the consent of all the partners.
8) Partners are not entitled to engage in competitive businesses.
9) The partnership books are to be kept at the place of business of the partnership.

Section 42 of the Partnership Act

When a partner retire, leaves, dies, unless his entitlement is paid on the same day, is entitled
to receive a minimum 5% annual interest from that day until the date of payment. Where
there is no partnership agreement, any disputes that arise must be resolved according to the
provisions in tha Act.

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 Compentancy Level 10.2
Evaluates Special Transactions of Partnership Businesses

The Returns that the Partnership gives the Partner’s

A contribution to the partnership business can be made thorugh supplying capital,

participation in the management, bearing risks, and through providing loans. While these
returns are not considered as expenses, they are considered as distribution of profits. The
returns that the partnership gives the partners is a distribution from the profits that had been
earned. While interest on loans provided to the partnership by the partners is considered a
business expense.

Parners Salaries

According to section 24 of the Partnership Ordinance while all partners must share in the
administration of the business there is no entitlement to a salary in respect of such assistance.
In actual practice however, when partners provided services to the business each partner is
given a prior share of the profits as a salary related to the amount of time each devotes to the
business.

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Interest on Capital

A contribution to the Partnership business can be made thorugh supplying capital. It is

appropoate to pay interest on the capital because the partner has invested capital in the
partnership having forgone the opportunity to invest in another business. But it is
meaningless to pay interest on capital to partners before distributing the profits when they
have contributed capital to the business equally.

Profit Shares

After distributing a portion of the profits as salary and interest on capital, the remaining profit
which is often referred to as the residual profit where there is no agreement according to
section 24 profit shares must ne shared equally. When there is an agreement among partners,
the residual profit should be distributed according to their profit sharing ratio.

Interest on Loans

Sometimes it is also possible that a partner makes an advance to the business as distinct from
capital, and the amount the thereof is to be as a normal business loan. Therefore such a loan is
not entered in the partner‟s capital account but rather in a separate loan account, which
constitutes along term liability. The partners are entitled to an interest on such loans as a rate
agreed upon in the partnership agreement. In the absence of agreement, the partnership act
requires that any partner who has given such loans to the firm is entitled to interest at the rate
of 5% per cent per annum. Interest loan is considered a business expense. The reason fro this
is because the loan is untilized for business activities.

Method of recording special transactions of partnership business

1) Parners‟ salaries contribution in management

………………………………………………………………………………………………
………………………………………………………………………………………………

2) Interest on capital
………………………………………………………………………………………………
………………………………………………………………………………………………

3) Share of profits
………………………………………………………………………………………………
………………………………………………………………………………………………

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4) Interest on loans provided by the partner‟s
………………………………………………………………………………………………
………………………………………………………………………………………………

Compentancy Level 10.3

Reveals the Partners Equity

Accounting for Partnerships.

This is equal very much to the sole proprietorship accounting. But the following additional
accounts are seen in the partnership accounting.
 Capital accounts for the partners
 Current accounts for the partners
 Loan accounts of partners.

Partner’s Capital Account

Capital accounts of the partners are used to record the partners fixed capital. The investment
made by the partners by way of cash or other assets are recorded in partners capital accounts.
Generally, the capital account is a stable account. Following are recorded in the capital
accounts.
 Capital invested at the commencement of the business.
 Additional capital invested subsequently.
 Withdrawals of capital with the consent of the other partners.
 Adjustment for goodwill

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 Given below is a specimen (Lay out) of a Capital Account.

Date Description A B C Date Description A B C

Writing off the Goodwill x x x B/B/F x x x
Withdrawal of Capital x x x Goodwill adjustment x x x
Additional capital
Balance C/F x x x x x x
contribution
x x x x x x
Balance B/F x x x

Partner’s Current Accounts

The partner‟s current accounts are used to ascertain the partner‟s variable capital. This is the
account being maintained to represent the current interest of the partners. A credit balance
reflects the retained share of the partner‟s profits and the debit balance shows the amount
overdrawn by the partners in excess of the profits which belong to the partners.

Following are recorded in the Partner’s Current Accounts

1) Interest payable on capital

2) Salaries and commissions payable to the partners
3) Charge on current account debit balances
4) Share of profit and losses
5) Rental expenses, interest expenses payable to the partners
6) Drawings of the partners
7) Business expenses borne by the partners.

Given below is a specimen of a Current Account

Date Description A B C Date Description A B C

B/B/F x x x B/B/F x x x
Drawings x x x Interest on Capital x x x
Interest on Current A/C x x x Partners Salaries x x x
Share of losses (Dr/B) x x x Profit Shares x x x
Salaries Paid x x x Loan interest payable x x x
Interest on Capital Paid x x x Rent Payable x x x
Business expenses borne x x x
by the partners
Balance C/F x x x Balance C/F x x x
x x x x x x
Balance C/D Balance C/D x x x

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Example 01
The following information sheet containing the conditions that govern the Partnership
Business of Ranga, Tharanga and Suranga.

 The capital account balances at the beginning of the year will be entitled to a 10% annual
interest.
 While Ranga and Tharanga are entitled to receive a monthly salary of Rs. 20,000 each,
andSuranga is to receive Rs. 15,000 per month.
 Any loans provided by the partners will receive interest at the rate of 10% per annum.
 Provide guidance to fill in the blanks with the correct values.

Provide guidance to fill in the blanks with the correct values.

Capital A/C Balances Effect on Equity

Interest on Capital
(Rs.) (Rs.)
Ranga 400,000
Tharanga 300,000
Suranga 200,000

Partneship Salaries Total Salary

(Rs.) (Rs.)
Ranga 20,000 ……………………….
Tharanga 20,000 ………………………. ……………………….
Suranga 15,000 ……………………….

 Ranga has provided a loan of Rs. 100,000. The net profit after deducting the interest is
Rs. 900,000. What is the profit share of each partner?

Ranga ……………………….
Tharanga ………………………. ……………………….
Suranga ……………………….

 The resulting equity of each partner, resulting from these transactions

Ranga ……………………….
Tharanga ………………………. ……………………….
Suranga ……………………….

 If the drawings of each partner respectively is Rs. 120,000 , Rs. 100,000 and Rs. 80,000
what is the impact and amount that affects equity?

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 Impact Amount (Value) Closing Equity

Ranga ………………………. ………………………. …………………

Tharanga ………………………. ………………………. …………………
Suranga ………………………. ………………………. …………………

Capital Account (Rs.)

Description Ranga Tharanga Suranga Description Ranga Tharanga Suranga

Current Account (Rs.)

Description Ranga Tharanga Suranga Description Ranga Tharanga Suranga

Example 02
The provisions in the partnership agreement between Ravi, Mani and Sunny are given below:
 From the beginning of the accounting period a 10% interest per annum is payable on the
capital a/c balances
 All partners are entitled to a partnership salary of Rs. 30,000 per month.
 For loans provided in excess of the capital a 10% rate of interest per annum is payable.
Profits and losses are to be shared equally.

The account balances of the partners as at 2019/04/01 is as follows (Rs.000's)

Ravi Mani Sunny

Capital 5,000 4,000 4,000
Total Equity 5,400 4,200 3,700

 Each partner has drawings as follows for the year ending 2020/03/31
Ravi Rs. 480,000
Mani Rs. 500,000

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 Sunny Rs. 320,000
 As on 2019/04/01 the balance on Raskika's loan account was Rs.200,000.
 The partnership business has earned a net profit of Rs. 2,580,000 for the year ending
2020/03/31 before the deduction of loan interest.
 Each partner invested Rs. 1,000,000 on 2020/03/30 and this money was utilized on the
same day for the purchase of a machine.

Required: Prepare Current accounts and Capital accounts of the partners.

Capital Account (Rs.)

Description Ranga Tharanga Suranga Description Ranga Tharanga Suranga

Current Account (Rs.)

Description Ranga Tharanga Suranga Description Ranga Tharanga Suranga

Statement of Share of Net Profit

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 Competency 10.4
Prepare the Income Statement of the Partnership and Appropiates the
Profit or Losses among Partners

Preparation of Financial Statements for a Partnership

The income statement and the balance sheet of a partnership are quite similar to those of a
sole proprietorship.

In the case of a sole proprietorship, since the net profit belongs exclusively to the owner,
there is not need for a separate appropriation section in its income statement. In a partnership
however, since the profit is shared by a number of partners its income statement includes a
separate for appropriation of profits. This is named as profit and loss appropriation statement.
Therefore the components of the financial statements of a partnership are given below.
 Profit and loss statement
 Profit and loss appropriation statement
 Statement of financial position

Profit and loss appropriation statement

Income statement of a partnership contains exactly the same entries as those of a sole
proprietorship.

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After the income statement is prepared for a partnership, the profit for the year is carried
down to an appropriation statement, in which is shown the sharing of profits or losses
between partners.

The information‟s included in a profit and loss appropriation statement can be shown as
follows.
1) Any payment received by a partner, with being in the capacity of a partner in the
partnership.
2) Any deduction from the receivables from a partner with being in the capacity of a partner
in the partnership.

Format 1

Interst on Current A/C

Debit Balances
THEYANG 2 A xx
B xx xx

Format 2 Format 3
Profit & Loss Appropiation Statement
A B Total

Double Entries in Appropriation Account

1) Salaries of Partners
………………………………………………………………………………………………
………………………………………………………………………………………………

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2) Interest on Capital
………………………………………………………………………………………………
………………………………………………………………………………………………

3) Profit Shares of the Partners

………………………………………………………………………………………………
………………………………………………………………………………………………

4) Share of Profits
………………………………………………………………………………………………
………………………………………………………………………………………………

However any payment what so ever received by a partner, without being in the capacity of a
partner in the partnership is taken to the income statement and not to the appropriation
statement.
E. g. Loan interest payable to the partners, rental charges payable to the partners, travelling
allowance payable to the partners.

Double entries for these Payments are as follows:

………………………………………………………………………………………………
………………………………………………………………………………………………

Exercises for Partnership Accounting

Exercise 1
Amali and Nimali were partners in a partnership business sharing profit and losses
in the ratio of 3:2 respectively. Following balances appeared in the ledger as at 01 st
April 2019.
Capital accounts Current accounts
Amali 500,000 40,000
Nimali 300,000 35,000

The following information was provided for the year ended 31 st March 2020
1) Nimali has introduced Rs. 100,000 as additional capital.
2) Amali withdrew Rs. 50,000 from the fixed capital with the consent of Nimal.
3) Rs. 60,000 and Rs. 40,000 credited to Amali and Nimali”s capital accounts
respectively as good will.
4) The following payments have to be done for the partners.
Amali Nimali
Interest on capital 50,000 40,000
Partner‟s salaries 24,000 30,000
Business Expense borne by the partners 6,000 5,000
Interest on loans 12,000 -
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 Rent on building - 124,000
Profit shares 90,000 60,000
5) Partners drawings are as follows: Amali Rs. 60,000 and Nimali Rs. 50,000

Required:
Prepare partners current account and capital account for the year ended 31.03.2020.
Exercise 2
The following information has given the partnership of Gunasinghe and Ranasinghe

Gunasinghe Ranasinghe
Capital accounts as at 01.04.2019 500,000 400,000
Current accounts as at 01.04.2019 60,000 30,000

Following transactions occurred during the year ended 31.03.2020

Gunasinghe Ranasinghe
1) Interest on capital 50,000 40,000
2) Partners salaries 24,000
3) Additional capital 100,000 50,000
4) Withdrawals from the fixed capital 25,000
5) Acquisition of a motor vehicle from the business 100,000
6) Transferring a motor vehicle to the business 200,000
7) Drawings 36,000 24,000
8) Increasing of good will 10,000 5,000
9) The expenses of the partners paid by the business 3,000
10) Profit shares 60,000 30,000
11) Business expenses paid by the partners 5,000
12) Interest payable for the loan 4,000

Required:
Prepare the partners current account and capital account for the year ended 31.03.2020.
Exercise 3
Following are the provisions in the agreement of the Anil, Basil, Cecil partnership
 10% interest on capital
 5% interest on partner‟s current account debit balances
 Anil & Basil receive a salary Rs. 1,500 and Rs. 1,000 per month respectively.
 Sharing profit and losses in the ratio of 5:3:2.

Following information extracted after preparing the income statement

Rs.
Net Profit 600,000
Capital account balances as at 01.04.2019 - Anil 300,000
Basil 250,000
Cecil 125,000

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Current account balances as at 01.04.2019 - Anil 60,000 (Dr)
Basil 80,000 (Cr)
Cecil 30,000 (Cr)
Following have not been considered when computing the net profit
Rent payable to Anil Rs. 20,000
Loan interest payable to Basil Rs. 8,000
You are required to prepare
(i) Profit and loss appropriation statement
(ii) Partners current accounts in columnar form
(iii) Extracts of the balance sheet
Exercise 4
Rathna and Deepa are in partnership. The partnership agreement contains the
following provisions
1) Interest on capital account balances at the beginning of each year 10% per annum.
2) While paying a salary for Rathna Rs.2, 000 per month, and Deepa Rs. 3,000 per
month.
3) Profit and losses sharing ratio of Rathna and Deepa was 3:2 respectively.

The following trial balance as at 31.03.2020 was extracted from the books of
partnership.
(000’) (000’)
st
Net profit for the year to 31 March 2020 320
Capital balances as at 01.04.2019 - Rathna 500
Deepa 380
Current account balances as at 01.04.2019 - Rathna 40
Deepa 78
Land & building at cost 600
Furniture and equipments at cost 300
Motor vehicles at cost 500
st
Provision for depreciation as at 31 March 2020
Furniture and equipments 90
Motor Vehicles 150
Loan account - Rathna 100
Stocks as at 31.03.2020 40
Debtors and Creditors 60 50
Accrued expenses 10
Pre-paid expenses 8
Interest payable to Rathna 12
Salary paid to Rathna 17
Drawings - Rathna 40
Deepa 30
Bank and cash balance 90
1,730 1,730

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Required:
(i) Profit and loss appropriation statement for the year ended 31.03.2020.
(ii) Partners Current Accounts
(iii) Statement of Financial Position as at 31.03.2020.
Exercise 5
Amal, Kamal and Nimal were in partnership sharing profit and losses in the ratio of
5:3:2 respectively. Balances in the partner’s accounts as at January 01 st 2019

Capital Accounts Current Accounts Drawings Accounts

Amal 200,000 40,000 (Dr) 12,000
Kamal 175,000 35,000 (Cr) 11,000
Nimal 150,000 20,000 (Cr) 14,000

As per partnership agreement

1) Partners receive interest of 10% on fixed capital per annum
2) Partners salaries Amal Rs. 2,000 per month and Kamal Rs. 2,500 per month.
3) Interest on current account debit balances 10% per annum

Other information are given below

1) The profit for the year ended 31.12.2019 showed Rs. 240,000 before charging interest
on loan.
2) The loan taken by the business on 01.07.2019 from Amal is Rs.60, 000.

Required:
(i) Profit and loss appropriation statement for the year ended 31.12.2019.
(ii) Partners current accounts.
Exercise 6
Lal, Nihal and Kamal were in partnership sharing profit and losses in the ratio 2:1:1
respectively. According to their partnership agreement each partner is entitled to an
annual salary of Rs. 12,000/-. The following trial balance was extracted as at 31st
March 2020.

Rs.(000) Rs.(000)
Building at cost 480
Plant and machinery - at cost 190
Motor vehicles - at cost 110
Provision for depreciation as at 01.04.2019
Buildings 37
Plant and machinery 30
Motor vehicles 46
Sales 900
Stocks as at 01.04.2019
Raw materials 140
Work in progress 60
Finished goods 290

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 Rates - Factory 12
Office 7
Direct wages 136
Electricity - Factory 12
Office 6
Purchase of raw materials 400
Return outwards 7
Discount allowed 4
Debtors 543
Creditors
Capital accounts - Lal 330
Nihal 500
Kamal 260
Current accounts - Lal 100
Nihal 70
Kamal 50
Factory maintenance 28
Bank balance 50
Carriage inwards 22
Carriage outwards 40
Factory supervisor‟s salaries 60

Additional information
1) Non current assets are to be depreciated using the following rates
Building 5% p.a.
Plant and machinery 10% p.a.
Motor vehicles 20% p.a.
st
2) Stocks on 31 March 2019 were valued at cost as follows:
Rs.
Raw materials 180,000
Work in progress 50,000
Finished goods 325,000
Work in progress is valued at factory cost. Goods costing Rs. 25,000 which are
included in the finished goods are damaged. They are expected to be realized at
Rs. 15,000. However, an expense of Rs. 5,000 has to be incurred to dispose these
items.
3) Salaries paid to partners Rs.30, 000 (Rs. 10,000 per partner) during the year have been
included in the direct wages account.
4) 50% of cost relevant to building premises and motor vehicle is applicable to the
factory.
Required:
(i) Manufacturing Account and Income Statement fo the year ended 31.03.2020
(ii) Partners Current Accounts
(iii) Statement of Financial Position as at 31.03.2020

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Exercise 7
1. State the provisions of partnership act on the following matters and give one
instance where each of these provisions may be inequitable.

Matter Provision in the Instance where

partnership provision
Act is inequitable
1) Sharing profits and losses
2) Interest on capital balances
3) Interest on advance given
by a partner
4) Salaries to partners

2. (a) Indicate whether each of the following statements in true or false.

If false state reasons.
1) Each partner is held personally liable for all the liabilities of the partnership.
2) The partners‟ salaries and interest on capital are not modes of profit appropriation.
3) Profits and losses of a partnership should be shared equally among the partners
unless the partnership agreement specifies otherwise.
4) Mutual agreement is a main feature of a partnership.
5) Non cash assets invested in a partnership by a new partner are not recorded.

(b) Anil and Basil are in partnership. In addition to his capital, Anil has provided a
loan of Rs. 300,000 to the partnership in the year ending 31.03.2020, the net
profit earned by the partnership, before charging interest on loan was Rs.
85,000.
Required:
(i) State the provisions under sections 24 and 42 of the partnership Act in relation to
the above partnership.
(ii) Anil‟s income from partnership for the year ending 31.03.2020.

(c) State a purpose of maintaining each of the following accounts in a partnership

and list two transactions recorded in each account.
Purpose Transactions
Capital accounts
Current accounts
Profit & loss appropriation account

3. State one main difference between each of the following pairs of terms pertaining to
partnership accounts.
(i) „Profit and loss account‟ and „Profit and loss appropriation account‟
(ii) „Capital account‟ and „current account‟

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Exercise 8
The Following information has given the Partnershiop of Pramitha and Bhratha‟s Business
and Rashmi and Vindana‟s Business
Prabha Ravi
Enterprise Enterprise
(Rs. ‟000 s) (Rs. ‟000 s)
1,000 Pramitha Capital Rashmi 1"200
800 Bharatha Vindana 1"000
200 Pramitha Current A/C Rashmi 300
100 Bharatha Vindana 200
150 Pramitha Drawings Rashmi 100
50 Bharatha Vindana 100
2,500 Sales 3000
1,000 Cost of Sales 1300
200 Administration Expenses 300
100 Distribution Expenses 150
90 Other Expenses 80
50 Financial Expenses 70
500 Pramitha Loans given to the business Rashmi 300
10% Interest on the Loans
5% Interest on Capital
10 Partners Salaries
700 Baratha Loans taken from the Bs.
10% Interest on Loan taken
2 : 1 Pramitha:Bharatha Profit sharing ratio

Required:
(i) Trading, Profit and Loss and Appropiation A/C of Prabha Enterprises for the year ending
31.03.2020
(ii) Trading, Profit and Loss and Appropiation A/C of Ravi Enterprises for the year ending
31.03.2020
Exercise9
Trial Balance of the partnership as at 2020/03/31
Athula & Mithula Singha and Weera
Account Name Enterpirse Enterprise
Debit Credit Debit Credit
2019/04/01 Stock 800 - 400 -
Sales revenue - 2,000 - 1,000
Property, plant & equipment 1,200 - 800 -
Debtors and creditors 300 250 200 500
Capital a/c - Athula/Sinha - 1,000 - 500
Mithula/Weera - 800 - 400

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 Current a/c - Athula/Sinha - 50 30 -
Mithula/Weera 10 - - 60
Purchases 1,400 - 850 -
Drawings - Athula 100 - - -
Weera - - 50 -
Advertising 20 - 40 -
Building rent 40 - 30 -
Electricity 110 - 80 -
Salaries & wages 180 - 90 -
Other income - 140 - 80
Salaries - Athula 50 - - -
Mithula 40 - - -
Interest on capital paid - Sinha - - 10 -
Weera - - 20 -
Loan a/c - Mithula/Weera - 150 - 100
Property, plant. Provision for depreciation - 60 - 40
(2019.04.01)
Provision for doubtful debts (2019.04/01) - 50 - 20
Cash & cash equivalents 250 - 100 -
4,500 4,500 2,700 2,700

The additional information below is relevant to both businesses.

1) The cost of the stock as at 2020/03/31 was Rs. 70,000 while its realizable value on that
day was Rs. 50,000.
2) Accrued expenses on 2020/03/31 was Electricity — Rs. 10,000
Prepaid building rent on 2020/03/31 was Rs. 5,000
3) Write off Rs. 50,000 as bad debts and make a provision for bad debts of 10% of the
remainder.
4) Partners' drawings as follows has not been recorded:
Athula - Rs. 10,000 Sinha - Rs. 15,000
Mithula - Rs. 20,000 Weera - Rs. 5,000
5) Athula has paid a electricity bill for Rs. 30,000 while Sinha has paid a telephone bill for
Rs. 10,000 on behalf of the business. These amounts have to be reimbursed.
6) The terms of the partnership agreement includes:
 10% annual interest is payable on the Capital
 Payment of Rs.60,000 per annum as salary for each partner
 Payment of 10% interest per annum on loans

Required:
(i) Trading, Profit and Loss and Appropiation A/C and Statement of Financial Position of
Athula and Mithula Enterprises for the year ending 31.03.2020
(ii) Trading, Profit and Loss and Appropiation A/C and Statement of Financial Position of
Singha and Weera Enterprises for the year ending 31.03.2020

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