ax Designs Services is a partnership with Adam and Max as partners. The partnership has been operating successfully for a number of years now. The partners have a written partnership agreement. The following information was extracted from the accounting records of Adax. Design Services for the financial year ended 28 February 2021: Balances in the ledger as at 28 February 2021 R Land and buildings a
Adax Designs Services is a
partnership has been operating successfully for a number of years now. The partners have a written partnership agreement. The following information was extracted from the accounting records of Adax. Design Services for the financial year ended 28 February 2021:
| Balances in the ledger as at 28 February 2021 | R |
| Land and buildings at cost Equipment at carrying amount Debtors Capital- Andile Capital- Sipho Current account- Andile Credit balance (1 March 2020) Current account –Sipho – Debit balance (1 March 2020 Drawings – Andile: General Drawings – Sipho: General Net profit for the year ended 28 February 2021 |
835 000 (65 000) 270 000 103 000 400 000 300 000 40 000 20 000 130 000 102 000 800 000 |
The following must still be taken into account:
1. The partnership agreement makes provision for the following:
• Interest on capital must be provided at 12% per year on the balances in the capital accounts for the period 1 March 2020 to 31 August 2020. The interest rate
increases to 15% per year for the remainder of the year ie 1 September 2020 to
28 February 2021. The capital accounts remained unchanged.
• Interest on current accounts must be provided at 12% per year on the opening balances of the current accounts.
• The partners are entitled to the following monthly salaries:
- Andile R18 000 per month for a full year.
- Sipho R20 000 per month for the full year.
• Andile and Sipho withdrew 50% of their monthly salaries in cash as drawings.
These amounts are not included in the drawings account shown above.
• Sipho is entitled to a special bonus equal to 2,5% of the net profit for the year.
• Andile and Sipho share
Required:
Use the information provided above to prepare the statement of changes in equity
(current accounts only) for the year ended 28 February 2021.
Use the following format: Capital accounts section is NOT required.
Adax Design Services
Statement of changes in equity for the year ended 28 February 2021
| Current Accounts only | Andile - R | Sipho – R | Appropriation |
| Balances at 1 March 2020 Profit for the year |
|||
| Appropriations: Interest on capital Interest on current accounts Salaries -partners Bonus – Sipho Remaining profits Share of profits |
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| Drawings Balance at 28 February 2021 |
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