8

2 James and Lewis have been in partnership for some years sharing profits and losses equally.
They had no partnership agreement. Their statement of financial position at 30 September 2015
showed the following information.

$
Non-current assets 230 000
Net current assets 60 000
290 000

Capital accounts
James 200 000
Lewis 70 000
270 000
Current accounts
James Lewis
$ $
Opening balance 31 000 17 000
Share of profit 15 000 15 000
Drawings (21 000) (37 000)
Closing balance 25 000 (5 000) 20 000
290 000

Additional information

On 1 October 2015 Ahmed joined the partnership. A partnership agreement was drawn up. The
terms set out in the agreement were:

1 Profits and losses are to be shared equally.

2 Interest is to be charged at 5% on drawings.

3 Interest is to be allowed at 10% on capital.

The following also took place:

1 Ahmed introduced capital of $80 000, which he paid into the business bank account.

2 Goodwill was valued at $60 000 but no goodwill account is to be maintained in the books of
account.

3 Non-current assets were revalued at $270 000.

4 The inventory value was to be reduced by $4000.

© UCLES 2016 9706/22/F/M/16

 9

REQUIRED

(a) Prepare the revaluation account.

[3]

(b) Prepare the capital accounts of the partners to record the admission of Ahmed.

[4]

© UCLES 2016 9706/22/F/M/16 [Turn over

 10

(c) State the advantages of interest on capital and interest on drawings.

(i) Advantage of interest on capital

to the partners

to the partnership

[2]

(ii) Advantage of interest on drawings

to the partners

to the partnership

[2]

© UCLES 2016 9706/22/F/M/16

 11

(d) Explain how the terms of the partnership agreement will affect James and Lewis.

(i) James

[2]

(ii) Lewis

[2]

[Total: 15]

© UCLES 2016 9706/22/F/M/16 [Turn over

 2

1 Henry and Robin are in partnership with capitals of $120 000 and $80 000 respectively. For
Examiner’s
On 1 June 2010 Henry had a debit balance on his current account of $6 600 and Robin had Use

a credit balance on his current account of $1 000.

On 31 May 2011 Henry had a credit balance on his current account of $10 400.

The partnership agreement stated:

1 Interest on capital is payable at 8% per annum.

2 The maximum drawings permitted in any one year is 10% of capital invested.

3 Interest on drawings is charged at 5% on total drawings for the year.

4 Annual partnership salaries were Henry: $5 000 and Robin: $4 000.

5 Profits and losses are to be shared in the ratio of capital invested.

Both partners withdrew the maximum amount permitted during the year.

REQUIRED

(a) Prepare the current account of each partner for the year ended 31 May 2011.

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....................................................................................................................................[14]
© UCLES 2011 9706/21/M/J/11
 3

(b) Calculate the profit for the year (net profit) made by the partnership for the year ended For
31 May 2011. Examiner’s
Use

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(c) Before forming a partnership both Henry and Robin were sole traders.

State four advantages of a partnership compared to a sole trader.

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[Total: 30]

© UCLES 2011 9706/21/M/J/11 [Turn over

 6

2 Colin, Darim and Emran are in partnership sharing profits and losses in the ratio 3 : 2 : 1. Their
statement of financial position at 30 November 2015 was as follows:

$
Non-current assets (at net book value)
Premises 135 000
Machinery 84 000
Motor vehicles 36 000
255 000
Current assets
Inventory 56 000
Trade receivables 48 000
Bank 21 000
125 000
Total assets 380 000

Capital and liabilities

Capital accounts
Colin 120 000
Darim 80 000
Emran 40 000
240 000
Current accounts
Colin 56 000
Darim 16 000
Emran 36 000
108 000
Current liabilities
Trade payables 32 000
Total capital and liabilities 380 000
Additional information

1 Darim retired on 1 December 2015. Colin and Emran continued in partnership sharing profits
and losses in the ratio 2 : 1.

2 Goodwill was valued at $48 000. It does not appear in the partnership’s financial statements.

3 Darim took over one of the partnership motor vehicles at a net book value of $8000.

4 The partners agreed to revalue some of the remaining assets as follows:

$
Premises 180 000
Motor vehicles 25 000
Inventory 52 000
Trade receivables 46 000

5 Darim agreed to receive $50 000 as part of the amount owing to him on his retirement. The
balance owing to him was to remain in the partnership as a loan to be repaid in 2018.

© UCLES 2016 9706/22/M/J/16

 7

REQUIRED

(a) Prepare the revaluation account on Darim’s retirement on 1 December 2015.

Revaluation account

[5]

Additional information

To help fund the payment to Darim on his retirement, Emran paid additional capital into the
partnership bank account. After this payment had been made the balance on Emran’s capital
account was $65 000.

REQUIRED

(b) Prepare a statement to show how much cash Emran paid into the partnership bank account.

[4]

© UCLES 2016 9706/22/M/J/16 [Turn over

 8

(c) State three advantages to a sole trader of forming a partnership.

[3]

(d) State three reasons why partnerships maintain separate capital accounts and current
accounts for each partner.

[3]

[Total: 15]

© UCLES 2016 9706/22/M/J/16

 8

2 Amit and Binu are in partnership sharing profits and losses in the ratio 3 : 2 respectively. The
partnership statement of financial position at 30 June 2016 is as follows:

$ $
Non-current assets
Premises 40 000
Machinery 32 000
Motor vehicles 18 000
90 000
Current assets
Inventory 18 600
Trade receivables 13 100 31 700
Total assets 121 700

Capital accounts
Amit 30 000
Binu 20 000 50 000
Current accounts
Amit 33 200
Binu 18 400 51 600
101 600
Current liabilities
Trade payables 9 800
Bank overdraft 10 300 20 100
Total capital and liabilities 121 700

The partners agreed to dissolve the partnership on 30 June 2016. This resulted in the following:

1 Trade receivables realised $12 600.

2 Trade payables were settled in full for $9800.

3 Inventory was sold for $15 000.

4 The machinery was sold for $35 000.

5 Amit agreed to take over the premises at an agreed valuation of $30 000.

6 Binu agreed to take over one of the motor vehicles at an agreed valuation of $6500. The
remaining motor vehicle was sold for $12 000.

7 The costs of dissolution were $6300.

© UCLES 2017 9706/21/M/J/17

 9

REQUIRED

(a) Prepare the realisation account on the dissolution of the partnership.

Realisation account

[6]

(b) Prepare a statement to show how much Binu will receive when the partnership bank account
is closed.

[4]

© UCLES 2017 9706/21/M/J/17 [Turn over

 2

1A James and Gemma are in partnership. They have provided the following information. For
Examiner’s
A balance sheet extract at 31 December 2008 showed the following balances: Use

$
Capital Accounts
James 90 000
Gemma 60 000
Current Accounts
James 12 000 (Cr)
Gemma 9 000 (Cr)

Inventory (stock) 6 300

Non-current (fixed) assets at cost 204 000
Loan 45 000

The partnership agreement provides for:

Interest on capital at 8% per annum.
No interest on drawings
A salary to Gemma of $6000 a year
Profits and losses to be shared equally

On 1 July 2009 James introduced a further $25 000 to increase his fixed capital. This money
was used to purchase additional non-current (fixed) assets on that date.

At 31 December 2009 the following information was available for the partnership.

$
Revenue (sales) 1 January 2009 – 30 June 2009 90 000
Revenue (sales) 1 July 2009 – 31 December 2009 150 000
Ordinary goods purchased (purchases) 1 January 2009 – 30 June 2009 70 000
Ordinary goods purchased (purchases) 1 July 2009 – 31 December 2009 104 000

Additional information

1 Mark up was 50% on cost.

2 Total expenses for the year were $25 525.

These included depreciation on non-current (fixed) assets at 5% per annum
(charged on cost for each proportion of the year) and the interest on the loan at 6%
per annum.

The remaining expenses were split equally for each half of the year.

3 There are no accruals or prepayments at the end of the year.

4 Drawings for the year were:

$
James 15 200
Gemma 18 300

© UCLES 2010 9706/23/O/N/10

 3

REQUIRED For
Examiner’s
(a) Assuming each month is of equal length prepare the income statement (profit and loss Use

account) and appropriation account for

(i) the six month period ended 30 June 2009.

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............................................................................................................................ [8]

© UCLES 2010 9706/23/O/N/10 [Turn over

 4

(ii) the six month period ended 31 December 2009. For

Examiner’s
.................................................................................................................................. Use

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............................................................................................................................. [7]

© UCLES 2010 9706/23/O/N/10

 5

(b) Prepare the current accounts in columnar form for both partners for the year ended For
31 December 2009. Examiner’s
Use

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..................................................................................................................................... [6]

(c) State three advantages for James and Gemma of trading as a partnership rather than
as sole traders.

1 ........................................................................................................................................

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2 ........................................................................................................................................

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3 ........................................................................................................................................

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[3]

© UCLES 2010 9706/23/O/N/10 [Turn over

 2

1 Carl and Daniel are in partnership. Their partnership agreement provides that: For
Examiner’s
1 Daniel has a partnership salary of $3000 per annum Use

2 Interest on capital is 6% per annum

3 Interest on drawings is charged

4 Residual profits / losses are shared 3:2 respectively.

The partners have never kept full accounting records but provided the following information:

Cash book summary for the year ended 31 December 2010

$ $
Balance b/d 2 178 Trade payables 195 911
Trade receivables 44 049 Wages 63 156
Cash sales 332 467 Purchase of machine 8 800
Rent received 7 000 General expenses 56 676
Drawings – Carl 35 660
Drawings – Daniel 26 480

The assets and liabilities were:

1 January 2010 31 December 2010

$ $
Fixed capital account – Carl 100 000Cr 100 000Cr
Fixed capital account – Daniel 70 000Cr 70 000Cr
Current account – Carl 3 210Cr ?
Current account – Daniel 1 304Cr ?
Machinery (Net Book Value) 147 000 145 000
Motor vehicle (Net Book Value) 16 000 8 000
Inventory 14 003 13 471
Trade receivables 317 183
Trade payables 4 872 5 163
Wages accrued 612 938
Rent receivable accrued 500 –
Rent receivable prepaid – 500

Additional information:

1. During the year, an old machine which had cost $10 000 was traded in for $3200 in part
exchange for a new machine costing $12 000. The old machine had been depreciated
by $6000 over its lifetime.

2. Interest on drawings for the year amounted to:

Carl – $230
Daniel – $100

© UCLES 2011 9706/23/O/N/11

 3

REQUIRED For
Examiner’s
(a) Prepare the income statement (trading and profit and loss account) and appropriation Use

account for Carl and Daniel for the year ended 31 December 2010.

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© UCLES 2011 9706/23/O/N/11 [Turn over
 4

For
.......................................................................................................................................... Examiner’s
Use

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.................................................................................................................................... [22]

© UCLES 2011 9706/23/O/N/11

 5

(b) Prepare the partners’ current accounts (in columnar format) for the year ended For
31 December 2010. Examiner’s
Use

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[Total: 30]
© UCLES 2011 9706/23/O/N/11 [Turn over
 2

1 Alan and Jack have been in partnership for several years, sharing profits and losses equally.
They prepare their financial statements annually to 30 September.

On 30 September 2014 the balances on their capital accounts were Alan $139 800 and Jack $128 000.

On 1 October 2014 the following took place:

1 Max joined the partnership. He paid $27 000 into the partnership bank account and introduced
inventory valued at $5000.

2 Alan transferred $15 000 from his capital account into a loan account. Interest on the loan is
to be paid at 10% per annum. The loan is repayable by 30 September 2020.

3 The partners agreed a value for goodwill of $40 000. No goodwill is to be recorded in the
books.

4 Alan, Jack and Max are to share profits and losses in the ratio 2 : 2 : 1 respectively.

REQUIRED

(a) Prepare the capital accounts of the partners at 1 October 2014 taking the above into account.

Alan, Jack and Max

Capital accounts at 1 October 2014

[6]

© UCLES 2016 9706/21/O/N/16

 3

(b) (i) State what is meant by goodwill.

[1]

(ii) State three factors which affect the value of goodwill.

[3]

Additional information

The terms of the new partnership agreement included the following:

Interest on capital 7.5% per annum on capital account balances at the end of each financial
year

Interest on drawings 3% on total drawings for the year

Salary to Max $10 000 per annum

The following information is also available for the year ended 30 September 2015:

Alan Jack Max

$ $ $
Current account balances at 1 October 2014 9 500 Credit 7 500 Credit Nil
Drawings for the year ended 30 September 2015 16 000 24 000 8 000

The residual profit to be shared by the partners in the profit sharing ratio is $90 000.

© UCLES 2016 9706/21/O/N/16 [Turn over

 4

REQUIRED

(c) Prepare the partners’ current accounts for the year ended 30 September 2015.

Alan, Jack and Max

Current accounts

[7]

(d) Calculate the profit for the year ended 30 September 2015 transferred from the income
statement to the appropriation account.

[5]

© UCLES 2016 9706/21/O/N/16

 5

Additional information
The partners have calculated the following ratios for the business:
30 September 2014 30 September 2015
Liquid (acid test) ratio 1.1 : 1 0.85 : 1
Trade receivables turnover 34 days 42 days
REQUIRED
(e) (i) Comment on the changes in liquidity of the partnership from 30 September 2014 to
30 September 2015.

[4]

(ii) Suggest ways in which the partnership liquidity may be improved.

[4]

[Total: 30]

© UCLES 2016 9706/21/O/N/16 [Turn over

 2

1 Tom and Jerry are in partnership. They do not have a formal partnership agreement.

The following information is available for the partnership for the year ended 30 November 2015:

$
Capital account balances at 30 November 2015
Tom 90 000
Jerry 54 000
Current account balances at 1 December 2014
Tom 18 000 Credit
Jerry 10 800 Debit
Drawings for the year
Tom 8 000
Jerry 2 800
Profit from operations 12 600
Loan from partner account
Tom 24 000

Tom made the loan to the partnership on 1 December 2014.

Profits had accrued evenly and drawings had been taken evenly throughout the year.

Additional information

Tom and Jerry prepared a formal partnership agreement to take effect from 1 September 2015.
The terms of the agreement were:

1 Interest on capital was to be at a rate of 8% per annum.

2 Interest on drawings was to be at a rate of 3% per annum based on the annual drawings.

3 Tom was to be paid a salary of $16 216 per annum.

4 Profits and losses were to be shared in the ratio 3 : 2 respectively.

5 Loan interest was to be paid at a rate of 4% per annum.

REQUIRED

(a) Calculate the profit before appropriation for the nine months ended 31 August 2015 and the
three months ended 30 November 2015.

[3]

© UCLES 2016 9706/22/O/N/16

 3

(b) Prepare the appropriation account for the nine months ended 31 August 2015 and the three
months ended 30 November 2015.

Appropriation Account

9 months 3 months
$ $

[6]

© UCLES 2016 9706/22/O/N/16 [Turn over

 4

(c) Prepare the current accounts for Tom and Jerry for the year ended 30 November 2015.

[8]

Additional information

The partnership is considering expansion and will need to purchase additional non-current assets
at a cost of $60 000.

REQUIRED

(d) State the difference between capital and revenue expenditure.

[2]

(e) Identify and explain one accounting concept relating to depreciation.

[3]

© UCLES 2016 9706/22/O/N/16

 5

(f) (i) Discuss two possible sources of finance which could be used to fund the purchase of
the additional non-current assets.

[6]

(ii) Recommend the most appropriate source of finance for the partnership. Justify your
answer.

[2]

[Total: 30]

© UCLES 2016 9706/22/O/N/16 [Turn over