Question

Allah, Ballah and Callah formed a Chartered Accountancy Firm in 2002. Their partnership agreement provided for the following:

1. Profits and Losses are to be shared as follows: Allah takes half, Ballah takes one-third and Callah takes the remainder.
2. Interest is to be charged on the partners’ drawings and capital balances at 3.5%vand 5% per annum respectively.
3. Allah, the administrative partner, is to be paid a monthly salary of GH¢2,400
4. Drawings by the partners were effected as follows:

Allah         GH¢36,000 on April 1,2004

Ballah        GH¢48,000 on June 30,2004

Callah        GH¢43,200 on September 30, 2004

In order to increase his capital contribution, Ballah, on July1,2004 released one of his private cars with a value of GH¢50,000 for exclusive use of the firm. He accordingly transferred the ownership of the car to the firm on the same date. On September 30,2004 it was further agreed that Allah should withdraw GH¢10,000 from his capital, while Callah should increase his capital by GH¢8,000.

The net profit for the year under consideration was GH¢71,565.

The partners credit balances as at January1, 2004 were as follows:

                                          Capital Account          Current Account

Allah                                 GH¢180,000                 GH¢10,500  

Ballah                                GH¢90,000                   GH¢8,200    

Callah                                GH¢62,000                    GH¢7,900   

Required: Prepare for the year ended 31^st December,2004

1. Profit and Loss Appropriation Account.
2. The Capital and Current Accounts of the partners in a columnar form.

                                         

Answer 1

WORKING NOTES

Profit Sharing of partners=100%

Allah=50%

Ballah=33%

Callah=17%

Interest on Drawings

Allah=GHC 36000*3.5%*9/12=GHC 945

Ballah=GHC 48000*3.5*6/12=GHC 840

Callah=GHC 43200*3.5%*3/12=GHC 378

TOTAL= GHC 2163

Interest on Capital

Allah =GHC 180000*5%=GHC 9000

Ballah =GHc 90000*5%=GHC 4500

Callah=GHC 62000*5%=GHc 3100

TOTAl=GHC 16600

profit And Loss Appropration Account

Particulars	Amount(GHC)	Particulars	Amount(GHC)
TO Allah salary	28800	BY balance b/d	71565
To int on capital	16600	BY int on Drawings	2163
To INt on Additional Capital Ballah =GHC 50000*5%*1/2 =GHC 1250 Callah =GHc 8000*5%*3/12 =GHC 100	1350	BY int on Drawings GHC 10000*3.5%*3/12 =88	88
TO Dep on Car (GHC 50000*15%*1/2)	3750
TO Partners CUrrent Account Allah=11658 Ballah=7694 Callah=3964	23316
	73816		73816

Partners CURRENT ACCOUNTS

Particulars	Allah	Ballah	Callah	Particulars	Allah	Ballah	Callah
				BY Balance b/d	10500	8200	7900
To Balance c/d	22226	15894	19864	By profit And loss A/c	11658	7694	3964
	22226	15894	11864			15894	11864

Partnesr CAPITAL ACCOUNTS

Particulars	Allah	Ballah	Callah	Particulars	Allah	Ballah	Callah
				BY Balance b/d	180000	90000	62000
TO bank	10000			BY Car Account		50000
				To bank Account			8000
TO balance c/d	170000	140000	70000
	170000	140000	70000				70000

NOTE-Assuming Depreciation on Car Charged 15% per year