Partnership Account (1)

Preparation of Financial Statement

Mann and Hatten are in partnership. The following trial balance was prepared on 31 December
2006:
RM RM
Furniture and fittings at cost 11,280
Carriage outwards 2,880
Sundry expenses 10,866
Insurance 1,080
Premises at cost 73,500
Gross Profit 59,610
Cash in hand 114
Bank 132
Dividends received 1,220
Accumulated depreciation furniture and fittings 1,128
Capital Accounts:
Mann 72,600
Hatten 90,900
Current Accounts:
Mann 2,100
Hatten 900
Inventory at-31 December 2006 47,086
Commission 1,680
Salaries 12,614
Account Receivable and Account Payable 13,250 24,870
Investment - shares in Jersey Ltd 53,400
Drawings - Mann 10,950
Hatten 18,120
255,140 255,140

The partnership agreement provides:

(i) Interest is allowed on the partners capital balances at 6% per annum.
(ii) Hatten shall be paid a salary of RM10,000 per annum.
(iii) Profits and losses to be shared between Mann and Hatten in the ratio of 3:1
respectively.

Additional information at 31 December 2006:

(i) Depreciation is to be provided at 10% on cost of furniture and fittings.
(ii) Insurance was prepaid, RM240.
(iii) Salaries, RM300, were owing.
(iv) The premises were revalued at RM81,500 on 31 December 2006.
No entries had been made in the books.

REQUIRED
Prepare:
(a) The Income Statement for the year ended 31 December 2006.
(b) The Current and Capital Accounts in columnar format at 31 December2006.

Answer Guide: (a) Net Profit RM33,882 Appropriation RM19,810 Share of Profit
Mann RM10,554 Hatten RM3,518 (b) Current Mann RM6,060(cr.);Hatten RM1,752(cr.)
Capital Mann RM78,600 (cr.) Hatten RM92,900 (cr.)