IGCSE Accounting Paper-2: Specimen Questions with Answers 187 - 188 of 189

Passage

Harry and Hermione are in partnership. Their partnership agreement provides that:

1. Partners are entitled to interest on their fixed capitals at 12 % per annum.

2. Partners’ loans carry interest at 10 % per annum.

3. Hermoine is to receive a salary of $6000 a year.

4. Profits and losses are to be shared in the ratio of 5: 3.

For the financial year ended 31 March 2020, balances in the partnership’s books included the following-

The financial year ended 31 March 2020, balances in the partnership’s books The financial year ended 31 March 2020, balances in the partnership’s books
Dr. $Cr. $
Capital A/cs on 1st April 2019 Harry35000
Hermione25000
Fixed Assets at Cost60000
Gross Profit for the year32000
Office Expenses1200
Salaries3000
Discount Allowed & Received600800
Commission Paid300

The following additional information is also given.

(1) At 31 March 2020:

Advance Salary paid was $1000,

Office expenses accrued were $600.

(2) Depreciation on fixed assets is to be provided at 10 % on cost. Fixed Assets were purchased on 1st July 2019.

(3) On 1st October 2019 Harry made a loan of $8000 to the partnership. No loan interest was paid to Harry in the year ended 31 March 2020.

Question 187 (1 of 2 Based on Passage)

Edit

Write in Brief

One Liner▾

State and explain one possible reason why Hermione receives a salary in addition to her share of partnership profits. (Marks 1)

Explanation

Hermoine may have more active participation in the management of the business. So, she is receiving salary for her additional responsibilities and devotion of time to business which Harry might not be performing.

Question 188 (2 of 2 Based on Passage)

Edit

Write in Short

Short Answer▾

Prepare (Marks 10)

(I) the partnership’s Profit and Loss Account and

(II) the partnership’s Appropriation Account for the year ended 31 March 2020

(I) Harry and Hermione Profit and Loss Account for the year ended 31 March 2020

Explanation

Harry and Hermione

Profit & Loss A/c for the year ended 31 March 2020

Profit & Loss A/c for the year ended 31 March 2020Profit & Loss A/c for the year ended 31 March 2020
$$
Depreciation4500Gross Profit b/d32000
Office Expenses $1200 Add: Office Exp. Accrued $6001800Discount Received800
Salaries $3000 Less: Advance Salary paid $10002000
Discount Allowed600
Commission300
Interest on Harry’s Loan400
Net Profit23200
3280032800

Depreciation on Fixed Assets =

Interest on Harry’s Loan =

(II) Appropriation Account for the year ended 31 March 2020

Ans (II) Harry and Hermione

Profit & Loss Appropriation A/c for the year ended 31 March 2020

Profit & Loss Appropriation A/c for the year ended 31 March 2020Profit & Loss Appropriation A/c for the year ended 31 March 2020
$$
Interest on Capital: Harry- Hermione- $4200 $30007200Net Profit b/d23200
Hermione’s Salary6000
Share in Profits:
Harry- $6250
Hermione- $375010000
2320023200

Interest on Capital:

Harry-

Hermione-

Share in Profits

Harry-

Hermione-

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