Sian and Tom are partners and divide profits and losses in line with the capital each has invested. Their partnership agreement sets out the following:
1 Capital is to earn interest at 6% per annum.
2 Sian is to receive a salary of $20000 per annum.
3 Drawings are charged interest at 3% per annum, calculated for each fraction of the year.
The profit for the year before appropriation for the year ended 31 March 2022 was $59190.
Drawings made during the year were:
1 April 2021: Sian $8000, Tom $10000
1 October 2021: Sian $6000, Tom $12000
The capital account balances on 1 April 2021 were:
Sian $150000
Tom $100000
The current account balances on 1 April 2021 were:
Sian $3000 credit
Tom $7000 debit
(a)[8]
Prepare the profit and loss appropriation account for Sian and Tom for the year ended 31 March 2022.
(b)[8]
Prepare the extract from the statement of financial position of Sian and Tom showing the capital accounts and the complete details of their current accounts at 31 March 2022.
(c)[2]
Explain the meaning of a debit balance in a partner’s current account.
(d)[2]
Explain the accounting principle of going concern.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme.