Grace is a sole trader. She is considering forming a partnership with her friend Kelly. What are the disadvantages to Grace of forming a partnership with Kelly?
Profits would be divided between Grace and Kelly.
Kelly may bring additional skills to the business.
Kelly would be entitled to drawings.
The responsibility for running the business would be shared between Grace and Kelly.
1 only
1 and 3 only
2 and 4
1, 3 and 4
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What is included in an appropriation account of a partnership?
the closing balance on each partner's current account
the interest on each partner's capital
each partner's share of the residual profit
the salary given to each partner
1 and 3
2 and 3 only
2, 3 and 4
3 and 4 only
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Which items are subtracted from the profit for the year in a partnership appropriation account?
interest on drawings
interest on capital
partners' salaries
partners' drawings
2 and 3 only
1, 2 and 3
2, 3 and 4
1 and 4
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Which item appears on the income statement for a partnership?
interest on partners' loans
interest on partners' drawings
interest on partners' capital
partners' salaries
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How is interest on capital recorded in the books of a partnership?
debit | credit | |
|---|---|---|
A | appropriation account | partner's capital account |
B | appropriation account | partner's current account |
C | partner's capital account | appropriation account |
D | partner's current account | appropriation account |
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A partner makes drawings during a financial year.
How is this recorded in the partner’s accounts?
credit the partner's capital account
credit the partner's current account
debit the partner's capital account
debit the partner's current account
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Xin and Yuqing are in a partnership. They each maintain both current and capital accounts. An inexperienced book-keeper prepared the following account which contains errors.
Xin capital account
$ | $ | ||
interest on capital | 2 500 | balance b/d | 50 000 |
balance c/d | 72 500 | loan made to partnership | 20 000 |
| drawings | 5 000 | |
75 000 | 75 000 |
What should appear as the closing balance on Xin's capital account?
$45 000
$47 500
$50 000
$70 000
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Elena and Alessandro are in partnership. The following information relates to Alessandro for the financial year.
$ | |
salary | 5 000 |
drawings | 3 200 |
share of profit | 8 500 |
The opening credit balance on Alessandro's current account was $31 400.
What was the closing balance on his current account?
$36 700
$41 700
$44 900
$48 100
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Dan and Roger were in a partnership, sharing profits and losses equally. The residual profit for the year, after appropriation, was $64 000. Roger provided the following information.
Roger | $ |
salary | 4 000 |
drawings | 15 000 |
interest on capital | 2 000 |
interest on drawings | 750 |
At the start of the year, Roger's current account had a credit balance of $2 800.
What was Roger's current account balance at the end of the year?
$17 050 credit
$21 050 credit
$22 550 credit
$25 050 credit
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JP and Duncan are in partnership. They provided the following information at the end of the financial year.
$ | $ | ||
profit for the year | 41 500 | ||
interest on capital | JP | 1 500 | |
Duncan | 2 000 | 3 500 | |
interest on drawings | JP | 500 | |
Duncan | 750 | 1 250 | |
salary | Duncan | 5 000 |
How much was available for distribution to the partners?
$31 750
$34 250
$38 750
$39 250
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Meena, Nina and Pyna are partners sharing profits and losses in the ratio 3 : 4 : 1. The profit for the year was $24 000. They provided the following information.
Meena $ | Nina $ | Pyna $ | Total $ | |
partner's salary | - | 1 000 | - | 1 000 |
interest on capital | 450 | 600 | 150 | 1 200 |
interest on drawings | 200 | 400 | - | 600 |
What was Nina's share of the residual profit?
$10 600
$10 800
$11 200
$12 800
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Aziz and Bilal are in a partnership with capital of $30 000 and $20 000 respectively.
The profit for the year was $47 000. Neither partner took any drawings during the year.
The partnership agreement provides that profits are to be shared in the proportion to capital invested and each partner is entitled to 5% interest in capital. In addition, Bilal is entitled to an annual salary of $4 500.
What was the total amount credited to Bilal's current account at the end of the year?
$16 000
$21 500
$24 300
$25 500
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The partnership agreement for Xylo and Yana states that:
neither partner receives interest on capital,
neither partner is charged interest on drawings,
Yana is entitled to an annual partnership salary of $4 000,
residual profits and losses are to be shared equally.
The profit for the year ended 31 May 2024 was $18 400. During the financial year, Yana took drawings of $2 500.
On 1 June 2023, the partners’ current account balances were as follows.
$ | |
Xylo | 3 000 credit |
Yana | 1 000 debit |
What was the balance on Yana's current account on 1 June 2024?
$300 debit
$6 450 credit
$7 700 credit
$9 700 credit
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Ash and Misty are in partnership sharing profits and losses in the ratio of 3 : 1. Ash is entitled to an annual salary of $6 000. The profit for the year ended 31 March 2024 was $2 400.
On 1 April 2023, Ash’s current account had a debit balance of $1 200.
What was the balance on Ash’s current account on 1 April 2024?
$2 100 credit
$3 900 debit
$7 500 credit
$7 800 credit
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Ishizu and Marik are in a partnership with capital of $12 000 and $8 000 respectively.
The loss for the year was $8 500. Only Marik took drawings during the year, these amounted to $2 000.
The partnership agreement provides that:
profits and losses are to be shared in the same proportion as the capital invested,
each partner is entitled to 5% interest on capital,
each partner is charged 5% on any drawings,
Marik is entitled to an annual salary of $800.
What was Marik's share of the residual loss?
$2 720
$4 080
$4 160
$4 880
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