Question

QUESTION 4                             PARTNERSHIPS                                                                               (20)

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.) (7)

4.2 Appropriation account (Close off the account.) (13)

INFORMATION

Balances in the ledger on 28 February 2017
	R
Capital: Sally	400 000
Capital: Monty	200 000
Current a/c: Sally (01 March 2016) (DR)	20 000
Current a/c: Monty (01 March 2016) (CR)	33 000
Drawings: Sally	200 000
Drawings: Monty	180 000

The following must be taken into account:

(a) 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 partners are entitled to the following monthly salaries:

Sally R12 000

Monty R13 000

Note: The partners’ salaries were 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.

Answer 1

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