In: Finance
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
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 | |||||