CH14 - Partnership

Question 1

Definition of PARTNERSHIP

Answer 1

The relationship which exists btwn persons carrying on a business in common with a view of profit.

Question 2

Partnership agreement

Answer 2

Not requirement, tapi x buat follow Akta Perkongsian.

Dlm agreement ada,
1. Salaries
2. Interest to be charged/paid [ income to partners / expenses to business ]
3. Amount of capital to be provided
4. Divisons of profit.

Question 3

What is APPROPRIATION ACCOUNTS?

Answer 3

Show the net profit appropriated to each partner (residual/profit) in accordance with the partnership agreement.

Question 4

Proforma APPROPRIATION ACCOUNTS

Answer 4

Net profit
- interest on loan
Adjusted net profit available for appropriation
+ interest on drawings
- salaries
- interest in capital
Share of net profit/residual profit

Question 5

Double entry to record interest earned on partner’s capital account balances?

Answer 5

Dr Appropriation account
Cr Partners’ current accounts

Question 6

Double entry to record interest payable on partners’ drawings?

Answer 6

Dr Partners’ current accounts
Cr Appropriation account

Question 7

DR balance / CR balance on a partner’s CURRENT ACCOUNT indicate?

Balance b/d yg kat bwh

Answer 7

b/d kat DEBIT current account = Partner yg hutang dgn business. (Partner owes the firm money)

b/d kat CREDIT current account = Business yg hutang dgn partner (The firm owes the partner money)

Question 8

Proforma CURRENT ACCOUNT

Answer 8

Drawings b/d
IOD salary
IOC
IOL
Share Profit

Question 9

CAPITAL ACCOUNT

Answer 9

Show cash/other assets brought into partnership by each partner.

Question 10

If the question ask TOTAL OF OWNERS EQUITY

Answer 10

Take,
Total balance current account + capital account

Question 11

Partnership accounts show a capital account and a current account for each partner.
Are the following statement true or false?

Answer 11

A wide range of items are recorded in the capital account - False
The current account normally remains constant from year to year - False

Question 12

Admission of a new partner

Answer 12

A new partner admitted to the partnership will introduce FUNDS to share in the ownership of the firm’s assets & to purchase a share of the partnerships’ GOODWILL

Question 13

Recording admissions - Goodwil

Answer 13

1) Dr Goodwill
Cr Old Partner’s Capital
[Old profit sharing ratio]

2) Record cash introduced by new partner.
(Stop here if the Goodwill is maintained)

3) if Goodwill is NOT MAINTAINED
Dr old & new partner’s capital
Cr Goodwill [new profit sharing ratio]

                Capital account Goodwill                       b/d [New profit                   Goodwill  sharing ratio]               [old profit ratio] c/d                                       Cash