Required: Open, post to and balance the appropriation account in the general ledger of Newcastle Enterprises for the year ended 29 February 2020.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is 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, drawings of a partner, etc.
The following information was taken from the books of Newcastle Enterprises.
Balances in the general ledger of Newcastle Enterprises for the financial year ended 29 February 2020.
See attatched 4.JPG
Appropriations according to the
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Interest on capital must be appropriated at 5% per annum. Capital account balances remain constant.
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Interest on drawings must be appropriated at 12% per annum. Assume drawings were made 3 months prior to the end of the financial year.
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Interest on current accounts must be appropriated at 7% per annum (on opening balances)
4. Both partners must receive an annual salary at the end of the financial year as follows:
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- M. Manchester – R65 000
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- L. Liverpool – R45 000
5. L. Liverpool must receive an annual bonus of R10 000 at the end of the financial year.
6. R35 000 must be transferred to the replacement reserve at the end of the financial year.
7. The remaining profit must be split between the partners in the following ratio:
M. Manchester: 5
L. Liverpool: 3
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Required:
Open, post to and balance the appropriation account in the general ledger of Newcastle Enterprises for the year ended 29 February 2020.
(Round to 2 decimal places)SEE attatched 15.JPG for correct answer format
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