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QUESTION 4 The information given below was extracted from the accounting records of Salmon Traders, a...

QUESTION 4 The information given below was extracted from the accounting records of Salmon Traders, a partnership business with Sally and Monty as partners. The financial year ends on the last day of February each year REQUIRED Prepare the following accounts in the General ledger of Salmon Traders: 4.1 Current a/c: Monty (Balance the account.] 4.2 Appropriation account (Close off the account.) PARTNERSHIPS (20) (13) INFORMATION Balances in the ledger on 28 February 2017 Capital: Sally Capital: Monty Current afe: Sally (01 March 2016) Current a/c: Monty (01 March 2016) Drawings: Sally Drawings: Monty 400 000 200 000 20 000 (DR) 33 000 (CR 200 000 180 000 The following must be taken into account la) The net profit according to the Profit and Loss account amounted to R500 000 on 28 February 2017 b) The partnership agreement makes provision for the following Interest on capital must be provided at 15% per annum on the balances in the capital accounts. Note. Sally increased his capital by R100 000 on 01 September 2016. Monty decreased his capital by R100 000 on the same date. The capital changes have been recorded * The partners are entitled to the following salaries: SALLY R12 000 and MONTY R13 000 NOTE: The partners salaries increased by 10% with effect from 01 December 2016 * Sally and Monty share the remaining profits or losses in the ratio of their capital balances as at the beginning of the financial year

Solutions

Expert Solution

Given Information
Balances in the ledger
Sally Monty
Capital Accounts 400000 200000
Current a/c 20000 Dr 33000 Cr
Drawings 180000 200000
Sally Monty
Capital Accounts 400000 200000
Sally Capital Increase on 1st Sep 100000
Monty Decrease capital on 1 Sep -100000
Interest on Capital
Sally Capital Sally Monty Sally Monty
from 1st March to 31 August 300000 300000 22500 22500
1 Sep to 28 Feb 400000 200000 30000 15000
Total Interest 52500 37500
Capital Accounts as on 1 March 300000 300000
Profit sharing Ratio 1 1 (1:1)
Interest on Capital 15%
P&L Appropriation Account
Dr Cr
Particular Amount Particular Amount
To Interest On Capital By Net Profit 500000
Sally 52500
Monty 37500 90000
To Salary
Sally (12000+12000*10%) 13200
Sally (13000+13000*10%) 14300 27500
To Profit transferred to capital accounts 382500
Sally 191250
Monty 191250
500000 500000
It is assumed that salary given are at the beginning of year, hence increase is applied on those salaries
Sally Capital Account
Dr Cr
Particular Amount Particular Amount
To Balance C/d 400000 By Balance b/d 300000
By Cash A/c 100000
(capital increased)
400000 400000
Monty Capital Account
Dr Cr
Particular Amount Particular Amount
To Cash A/c 100000 By Balance C/d 300000
(Capital Withdrawn)
To Balance b/d 200000
300000 300000
Sally Current Account
Dr Cr
Particular Amount Particular Amount
To Balance b/d 20000 By Profit Trf from P&L App A/c 191250
to Drawings 200000 By Salary 13200
By Balance C/d 15550
220000 220000
MontyCurrent Account
Dr Cr
Particular Amount Particular Amount
to Drawings 180000 By Balance b/d 33000
To Balance c/d 58550 By Profit Trf from P&L App A/c 191250
By Salary 14300
238550 238550

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