CIE Accounting Paper-2: Specimen Questions 40 - 41 of 103

Passage

King and Queen commenced business as partners on April 1st 2006. King contributed £80000 and Queen contributed £50000 as capital. Their profit sharing ratio was decided as 2: 1. During the year King withdrew £8000 and Queen withdrew £16000. King was also entitled for salary amounting to £12000. Interest on capital was [email protected]%. The profit of the firm after providing for salary and interest on capital was £24000.

Question number: 40 (5 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

What is meant by capital Account in a partnership firm?

Explanation

In a partnership firm, the term capital refers to the amount of cash contributed by each partner, for the establishment of the partnership firm. Partner’s capital Accounts are prepared during the year to find out the exact contribution made by each partner towards the firm. The capital accounts can either be fixed or fluctuating in nature depending upon the partnership agreement.

Passage

Turbo & Co. forfeited 100 equity shares of £100 each held by Mr. Andy on 20th December 2011, for nonpayment of first call of £20 per share and final call of £30 per share. These shares were reissued to Mr. Candy on 31st December 2011, at a discount of £35 per share.

Question number: 41 (1 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

What would be the journal entries in the books of Turbo & Co. ?

Explanation

Journal entries in the books of Turbo & Co.

Table of Journal entries in the books of Turbo & Co.

Date

Particulars

Lf

Debit amount

Credit amount

20.12. 2011

Share capital A/c Dr

10000

To 1st call in arrear A/c

2000

To final call in arrear A/c

3000

To share forfeiture A/c

5000

(Being 100 shares of £100 each forfeited for nonpayment of first call of £20 and final call of £30 respectively)

31.12. 2011

Bank A/c Dr

6500

Share forfeiture A/c Dr

3500

To share capital A/c

10000

(Being forfeited shares reissued to Mr. Candy at a discount of £35 per share)

31.12. 2011

Share forfeiture A/c Dr

1500

To Capital reserve A/c

1500

(Being balance in share forfeiture A/c transferred to Capital reserve A/c)

Capital reserve = £5000 - £3500 = £1500

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