Answered: and decided to share profits in the…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter15: Partnership Accounting

Section: Chapter Questions

Problem 1PA: The partnership of Tatum and Brook shares profits and losses in a 60:40 ratio respectively after...

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Saud, Salim and Sulaimon started a partnership firm on January 1, 2019. They contributed RO. 50,000, RO. 40,000 and RO. 30,000 respectively as their capitals and decided to share profits in the ratio of 3:2:1. The partnership deed provided that Saud is to be paid salary of RO. 12000 p.a. and Salim commission of RO. 2,500 every 6 months. It also provided that interest on capital be allowed @ 6% p.a. The drawings for the year were: Saud RO. 6,000, Salim RO. 4,000 and Sulaimon RO. 2,000. Interest on drawings was RO. 270 for Saud, RO.180 for Salim and RO. 90 for Sulaimon. The net amount of profit as per the profit and loss account for the year ended 2019 was RO. 35,660.

The balance of capital for partner Sulaimon at the end of the year will be:

RO 31710

RO 15885

RO 37110

RO 15485

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Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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