Accounting 9706 · AS & A Level · Preparation of financial statements
Preparation of financial statements — practice question
Alan and Jack have operated as partners for a number of years, dividing profits and losses equally. They draw up financial statements each year to 30 September. On 30 September 2014, the balances on their capital accounts stood at Alan $139800$ and Jack $128000$. On 1 October 2014, several changes took place involving Max being admitted, capital being transferred to a loan account, goodwill being recognised, and a revised profit-and-loss sharing ratio.
(a)[6]
Draw up the partners’ capital accounts at 1 October 2014 using the information above.
(b(i))[1]
State what goodwill means.
(b(ii))[3]
State three factors which affect the value of goodwill.
(c)[7]
Prepare the partners’ current accounts for the year ended 30 September 2015.
(d)[5]
Calculate the profit for the year ended 30 September 2015 transferred from the income appropriation statement to the appropriation account.
(e(i))[4]
Comment on the changes in liquidity of the partnership from 30 September 2014 to 30 September 2015.
(e(ii))[4]
Suggest ways in which the partnership liquidity may be improved.
Worked solution & mark scheme
This 30-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Goodwill: Accept Alan 4000 Cr, Jack 4000 Cr, Max 8000 Dr” …