IGCSE Accounting Paper-2: Specimen Questions with Answers 189 - 189 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 $ 6,000 a year.

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

For the financial year ended 31 March 2,020, balances in the partnership’s books included the following-

The Financial Year Ended 31 March 2,020, Balances in the Partnership’s Books
Dr. $

Cr. $

Capital A/cs on 1st April 2,019 Harry

35,000

Hermione

25,000

Fixed Assets at Cost

60,000

Gross Profit for the year

32,000

Office Expenses

1,200

Salaries

3,000

Discount Allowed & Received

600

800

Commission Paid

300

The following additional information is also given.

(1) At 31 March 2,020:

Advance Salary paid was $ 1,000,

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 2,019.

(3) On 1st October 2,019 Harry made a loan of $ 8,000 to the partnership. No loan interest was paid to Harry in the year ended 31 March 2,020.

Question 189 (2 of 2 Based on Passage)

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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.

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