IGCSE Accounting Paper-1: Specimen Questions with Answers 312 - 313 of 338

Passage

A, B and C are partners in a firm sharing profits in the ratio of 7: 4: 9. Their fixed capitals are A: $ 20000, B: 7500 and C: 35000. The partnership agreement provided for the following-

(I) Interest on Capital@10 % pa

(II) Salary of $ 600 pm to B

(III) Interest on drawings@6 % pa.

During the year ended 31 December 2019, the firm earned a profit of $ 17000. Interest on A՚s drawings was $ 75, on B՚s drawings $ 45 and on C՚s drawings 130.

Question 312 (2 of 2 Based on Passage)

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Write in Short

Short Answer▾

State the reason why the firm is preparing current account of partners instead of only capital accounts.

Explanation

  • Here, the capitals of Partners are to be kept fixed. So, the firm is preparing current accounts to record all the appropriations of profits- Interest on Capital, Interest on Drawings, Salaries and share in Profits.
  • If all these are recorded under the Capital Accounts itself, the capitals of partners would no longer be fixed or there would be fluctuations in the capitals.

Passage

Sara and Zara are in partnership. The partnership agreement states the following-

That

  • The interest on capital is paid at the rate of 12 % per annum.
  • The profits and losses are to be shared in the ratio of 7: 3 respectively
  • Zara is to receive salary of $ 400 pm

The following information is available

Sara and Zara Are in Partnership
On 1 April 2018Dollar $
Capital Accounts-

Sara

Zara

40000

15000

Current Accounts-

Sara

Zara

4500 Credit

3000 Debit

For the year ended 31 March 2019

Profit for the year

Drawings-

Sara

Zara

25000

5000

3500

On 1 April 2018 $

Capital Accounts

Sara 40000

Zara 15000

Current Accounts

Sara 4500 Credit

Zara 3000 Debit

For the year ended 31 March 2019

Profit for the year 25000

Drawings-

Sara 5000

Zara 3500

On 1 January 2019 Sara introduced additional capital of $ 8000 into the partnership in the form of cash.

Question 313 (1 of 4 Based on Passage)

Question

MCQ▾

In the absence of any agreement regarding the same, specify the rules relating to the following:

(Marks 4)

Choices

Choice (4)

a.

Salary to a Partner

b.

Sharing of Profits & Losses

c.

Interest on Partners Drawings

d.

Interest on partners capital

Answer

c.

Explanation

  • Sharing of Profits & Losses- In the absence of any agreement on profit sharing ratio, profit will be shared equally.
  • Interest on Partners Capital- In the absence of agreement for interest on capital, Interest on Partners capital will not be given.
  • Interest on Partners Drawings- Interest on Drawings will not be charged
  • Salary to a Partner- In the absence of prior agreement, no partner will be entitled for getting any salary for his work even if the other is non-working.

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