Accounting 9706 · AS & A Level · Preparation of financial statements

Preparation of financial statements — practice question

Ahmed and Bashmir run separate garage businesses and decide to set up a joint venture to buy and sell second hand cars. Any profits and losses are divided two thirds to Ahmed and one third to Bashmir.
(a)[9]

Set up the memorandum joint venture account.

(b)[8]

Prepare the joint venture account in Ahmed's books and indicate the balance due to or from Bashmir.

(c)[1]

State the heading under which the balance due will appear in Ahmed’s statement of financial position.

(d(i))[3]

Calculate the correct total profit for the joint venture, beginning with your answer to part (a).

(d(ii))[1]

Calculate the extra profit due to Ahmed from the joint venture.

(e)[3]

Evaluate whether Ahmed ought to have entered into the joint venture with Bashmir. Justify your answer.

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