Podcast
Questions and Answers
What is the primary objective of a partnership?
What is the primary objective of a partnership?
- To make a loss
- To make a profit (correct)
- To create employment
- To obtain loans
What is a characteristic of a partnership?
What is a characteristic of a partnership?
- It is a separate legal entity
- It is not a separate legal entity (correct)
- It can own assets
- It cannot enter into contracts
What are the equity accounts in a partnership composed of?
What are the equity accounts in a partnership composed of?
- Only current accounts
- Capital accounts and current accounts (correct)
- Only capital accounts
- Drawing accounts only
What is the purpose of capital accounts in a partnership?
What is the purpose of capital accounts in a partnership?
What is recorded in the current accounts of each partner?
What is recorded in the current accounts of each partner?
What happens to the drawings of each partner at the end of the financial year?
What happens to the drawings of each partner at the end of the financial year?
How is the profit of a partnership calculated?
How is the profit of a partnership calculated?
What is the main difference between a partnership and a sole proprietorship?
What is the main difference between a partnership and a sole proprietorship?
What is the period of the unsecured loan granted by Den Bank to Matrix Traders?
What is the period of the unsecured loan granted by Den Bank to Matrix Traders?
What is the amount of Trading inventory on hand as at 28 February 20.15?
What is the amount of Trading inventory on hand as at 28 February 20.15?
What is the contract amount for the advertising that was taken for the period 01 June 20.14 to 31 May 20.15?
What is the contract amount for the advertising that was taken for the period 01 June 20.14 to 31 May 20.15?
How often are the salary payments made to each partner?
How often are the salary payments made to each partner?
What is the rate of interest allowed on the capital balances of the partners?
What is the rate of interest allowed on the capital balances of the partners?
What is the amount of bonus entitled to Rixon?
What is the amount of bonus entitled to Rixon?
What is the method used to provide for depreciation on equipment?
What is the method used to provide for depreciation on equipment?
What is the amount of the telephone account for February 20.15 that has not yet been paid?
What is the amount of the telephone account for February 20.15 that has not yet been paid?
What is the annual rent received from the tenant for leasing a part of the building?
What is the annual rent received from the tenant for leasing a part of the building?
What are the components that the statement of changes in equity shows?
What are the components that the statement of changes in equity shows?
In a partnership, how is a partner's salary treated in accounting?
In a partnership, how is a partner's salary treated in accounting?
What is the purpose of providing interest on capital in a partnership?
What is the purpose of providing interest on capital in a partnership?
How is interest on drawings treated in a partnership?
How is interest on drawings treated in a partnership?
What is the last step in appropriating profit in a partnership?
What is the last step in appropriating profit in a partnership?
What is the purpose of preparing financial statements in a partnership?
What is the purpose of preparing financial statements in a partnership?
What financial statement reflects the financial result of the business in a partnership?
What financial statement reflects the financial result of the business in a partnership?
How is a partner's current account affected when they withdraw more than they are entitled to?
How is a partner's current account affected when they withdraw more than they are entitled to?
What is the order of appropriation of profit in a partnership?
What is the order of appropriation of profit in a partnership?
What is the nature of interest on capital in a partnership?
What is the nature of interest on capital in a partnership?
What is the purpose of recording a partner's salary in a partnership?
What is the purpose of recording a partner's salary in a partnership?
What is the interest on drawings for Ed and Con respectively?
What is the interest on drawings for Ed and Con respectively?
How is the remaining profit or loss shared by the partners at the end of the financial year?
How is the remaining profit or loss shared by the partners at the end of the financial year?
What is the balance of the capital account of Sam as at 28 February 20.15?
What is the balance of the capital account of Sam as at 28 February 20.15?
What is the interest on capital for Sam for the year ended 28 February 20.15?
What is the interest on capital for Sam for the year ended 28 February 20.15?
What is the net profit reflected in the statement of comprehensive income of Protea Traders?
What is the net profit reflected in the statement of comprehensive income of Protea Traders?
By how much did Hashim decrease his capital on 01 June 20.14?
By how much did Hashim decrease his capital on 01 June 20.14?
What is the interest on drawings for Hashim for the year ended 28 February 20.15?
What is the interest on drawings for Hashim for the year ended 28 February 20.15?
What is the balance of Steyn's capital account after the increase on 01 December 20.14?
What is the balance of Steyn's capital account after the increase on 01 December 20.14?
What is the total value of drawings by Kivesh and Niemand for the year ended 28 February 20.15?
What is the total value of drawings by Kivesh and Niemand for the year ended 28 February 20.15?
What is the interest rate on the loan from Vin Bank?
What is the interest rate on the loan from Vin Bank?
What is the amount of merchandise inventory on hand as at 28 February 20.15?
What is the amount of merchandise inventory on hand as at 28 February 20.15?
What is the depreciation method used for equipment?
What is the depreciation method used for equipment?
What is the amount of interest on fixed deposit that needs to be provided for?
What is the amount of interest on fixed deposit that needs to be provided for?
What is the amount of rent received up to 31 March 20.15?
What is the amount of rent received up to 31 March 20.15?
What is the amount of salary allowed to each partner monthly?
What is the amount of salary allowed to each partner monthly?
What is the formula to calculate the total profit share?
What is the formula to calculate the total profit share?
How is interest on capital calculated?
How is interest on capital calculated?
What is the interest rate on capital allowed to each partner?
What is the interest rate on capital allowed to each partner?
What happens to the drawings of each partner at the end of the financial year?
What happens to the drawings of each partner at the end of the financial year?
What is the amount of bonus to be received by Kivesh?
What is the amount of bonus to be received by Kivesh?
How are inventories measured in the financial statements?
How are inventories measured in the financial statements?
What is the ratio in which the remaining profit (loss) is shared between Kivesh and Niemand?
What is the ratio in which the remaining profit (loss) is shared between Kivesh and Niemand?
What is the purpose of the notes to the financial statements?
What is the purpose of the notes to the financial statements?
How is the net profit for the year allocated to each partner?
How is the net profit for the year allocated to each partner?
What is recorded in the statement of financial position under equity?
What is recorded in the statement of financial position under equity?
What is the purpose of the statement of changes in equity?
What is the purpose of the statement of changes in equity?
How is the balance as at 28 February 20.15 calculated?
How is the balance as at 28 February 20.15 calculated?
What is the measurement basis of the financial statements?
What is the measurement basis of the financial statements?
What is the total interest on capital?
What is the total interest on capital?
What is the total equity as at 28 February 20.15 for Protea Traders?
What is the total equity as at 28 February 20.15 for Protea Traders?
What is Sam's share of the remaining shortfall?
What is Sam's share of the remaining shortfall?
What is Sing's current account balance?
What is Sing's current account balance?
What is the gross profit for Kiveshnie Traders for the year ended 28 February 20.15?
What is the gross profit for Kiveshnie Traders for the year ended 28 February 20.15?
What is the bad debt written off for Kiveshnie Traders for the year ended 28 February 20.15?
What is the bad debt written off for Kiveshnie Traders for the year ended 28 February 20.15?
What is the total capital of Hashim and Steyn as at 28 February 20.15?
What is the total capital of Hashim and Steyn as at 28 February 20.15?
How is the interest on capital calculated for Hashim?
How is the interest on capital calculated for Hashim?
What is the depreciation expense for Kiveshnie Traders for the year ended 28 February 20.15?
What is the depreciation expense for Kiveshnie Traders for the year ended 28 February 20.15?
What is the interest income for Kiveshnie Traders for the year ended 28 February 20.15?
What is the interest income for Kiveshnie Traders for the year ended 28 February 20.15?
What is the total profit share for the year?
What is the total profit share for the year?
What is the ratio of Hashim's and Steyn's capital balances?
What is the ratio of Hashim's and Steyn's capital balances?
What is the net profit for Kiveshnie Traders for the year ended 28 February 20.15?
What is the net profit for Kiveshnie Traders for the year ended 28 February 20.15?
What is the interest on capital for Steyn for the financial year?
What is the interest on capital for Steyn for the financial year?
What is the balance of the current account for Kivesh as at 28 February 20.15?
What is the balance of the current account for Kivesh as at 28 February 20.15?
What is the balance as at 28 February 20.14 for Hashim's capital account?
What is the balance as at 28 February 20.14 for Hashim's capital account?
What is the total drawings for Kivesh and Niemand for the year ended 28 February 20.15?
What is the total drawings for Kivesh and Niemand for the year ended 28 February 20.15?
What is the interest on capital for Kivesh and Niemand for the year ended 28 February 20.15?
What is the interest on capital for Kivesh and Niemand for the year ended 28 February 20.15?
What is the profit share ratio for Hashim and Steyn?
What is the profit share ratio for Hashim and Steyn?
What is the profit share for Kivesh and Niemand for the year ended 28 February 20.15?
What is the profit share for Kivesh and Niemand for the year ended 28 February 20.15?
What is the total value of Non-current assets in Kiveshnie Traders' Statement of Financial Position as at 28 February 20.15?
What is the total value of Non-current assets in Kiveshnie Traders' Statement of Financial Position as at 28 February 20.15?
How is interest on capital calculated in Kiveshnie Traders?
How is interest on capital calculated in Kiveshnie Traders?
What is the total value of Current liabilities in Kiveshnie Traders' Statement of Financial Position as at 28 February 20.15?
What is the total value of Current liabilities in Kiveshnie Traders' Statement of Financial Position as at 28 February 20.15?
How is the equipment written off in Kiveshnie Traders?
How is the equipment written off in Kiveshnie Traders?
What is the total value of Inventories in Kiveshnie Traders' Statement of Financial Position as at 28 February 20.15?
What is the total value of Inventories in Kiveshnie Traders' Statement of Financial Position as at 28 February 20.15?
What is the interest rate on the unsecured loan granted by Vin Bank to Kiveshnie Traders?
What is the interest rate on the unsecured loan granted by Vin Bank to Kiveshnie Traders?
What is the total value of Equity in Kiveshnie Traders' Statement of Financial Position as at 28 February 20.15?
What is the total value of Equity in Kiveshnie Traders' Statement of Financial Position as at 28 February 20.15?
What is the method used to measure Inventories in Kiveshnie Traders?
What is the method used to measure Inventories in Kiveshnie Traders?
What is the carrying value of Land and buildings as at the beginning of the year?
What is the carrying value of Land and buildings as at the beginning of the year?
What is the value of Cash and cash equivalents in Kiveshnie Traders' Statement of Financial Position as at 28 February 20.15?
What is the value of Cash and cash equivalents in Kiveshnie Traders' Statement of Financial Position as at 28 February 20.15?
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Study Notes
Partnerships in Business
- A partnership is an agreement between two or more people who invest in a business with the aim of making a profit, which is then shared.
- A partnership is not a separate legal entity, meaning it cannot own assets, incur liabilities, enter into contracts, sue, or be sued.
- The accounting entries for income, expenses, assets, and liabilities of a partnership are the same as for a sole proprietorship.
Equity Accounts in a Partnership
- The equity of a partnership includes capital accounts and current accounts.
- Separate capital accounts are opened for each partner, recording capital contributions or decreases.
- Current accounts are also opened for each partner, recording items such as salaries, bonuses, interest on capital, and share of profits or losses.
Sharing Profits in a Partnership
- Profit is calculated in the same way as for a sole proprietorship.
- Partners' salaries, bonuses, and interest on capital are recorded before the remaining profit (loss) is shared.
- Partners' salaries are treated as an appropriation of profit, not a business expense.
- Interest on capital is provided for in partnership agreements to be fair to partners with different capital contributions.
- Interest on drawings is not treated as an expense, but rather as a transaction with partners.
Preparation of Financial Statements of a Partnership
- The basic financial statements of a partnership include:
- Statement of comprehensive income
- Statement of changes in equity
- Statement of financial position
- The statement of comprehensive income reflects the financial result of the business.
- The statement of changes in equity shows the movements in capital and current accounts of partners.
- The statement of financial position presents the financial position of the business.
Statement of Changes in Equity
- The statement of changes in equity includes:
- Opening and closing balances of each partner's capital account and current account
- Transactions with partners, including increases and decreases in capital and current accounts
- Distribution of profit to partners
- The statement of changes in equity is used to calculate the net profit for each partner.
Statement of Financial Position and Notes to the Financial Statements
- The statement of financial position for a partnership includes the equity section, which consists of partners' capital accounts and current accounts.
- Notes to the financial statements provide additional information about specific items on the financial statements.
I hope this helps! Let me know if you need anything else.### Calculating Interest on Capital and Remaining Profit
- Total interest on capital: R8,437.50 + R10,312.50 = R18,750
- Calculation of remaining profit: Net profit + Interest on drawings – Interest on capital = R80,000 + R1,700 – R18,750 = R62,950
- Calculation of share in remaining profit: Ed: R62,950 x 3/5 = R37,770, Con: R62,950 x 2/5 = R25,180
- Ratio of capitals at the end of the year: R75,000:R50,000 = 75:50 = 3:2
Interest on Capital and Remaining Shortfall
- Calculation of interest on capital: Sam: R400,000 x 12% x 6/12 = R24,000, R400,000 x 15% x 6/12 = R30,000
- Sing: R300,000 x 12% x 6/12 = R18,000, R300,000 x 15% x 6/12 = R22,500
- Remaining shortfall: Net profit + Interest on drawings – Interest on capital = R74,800 + R5,700 – R94,500 = (R14,000)
- Sam's share: R14,000 x 4/7 = R8,000, Sing's share: R14,000 x 3/7 = R6,000
- Ratio of capitals: R400,000:R300,000 = 4:3
Current Accounts
- Sam's current account: R10,000 + R54,000 – R2,700 – R52,000 – R8,000 = R1,300 (credit balance)
- Sing's current account: – R13,000 + R40,500 – R3,000 – R60,000 – R6,000 = – R41,500 (debit balance)
Protea Traders: Statement of Changes in Equity
- Capital accounts: Hashim (R200,000), Steyn (R300,000), Total (R500,000)
- Current accounts: Hashim (R80,710), Steyn (R81,290), Total (R162,000)
- Interest on capital: Hashim (R27,000), Steyn (R30,600)
- Profit share: Hashim (R78,960), Steyn (R118,440)
Protea Traders: Statement of Financial Position
- Equity and liabilities: Capital (R500,000), Current accounts (R162,000)
- Total equity and liabilities: R662,000
Kiveshnie Traders: Statement of Comprehensive Income
- Sales: R1,386,920
- Gross profit: R526,520
- Operating profit: R550,520
- Net profit for the year: R398,760
Kiveshnie Traders: Statement of Changes in Equity
- Capital accounts: Kivesh (R370,000), Niemand (R330,000), Total (R700,000)
- Current accounts: Kivesh (R141,756), Niemand (R53,924), Total (R195,680)
- Interest on capital: Kivesh (R51,000), Niemand (R53,100)
- Profit share: Kivesh (R44,436), Niemand (R29,624)
Kiveshnie Traders: Statement of Financial Position
- Assets: Non-current assets (R594,200), Current assets (R410,780), Total assets (R1,004,980)
- Equity and liabilities: Equity (R895,680), Non-current liabilities (R63,000), Current liabilities (R46,300), Total equity and liabilities (R1,004,980)
Notes to the Financial Statements
- Accounting policy: Historical cost, consistent with previous year
- Property, plant, and equipment: Written off at 20% per annum on the diminishing balance
- Inventories: Measured at the lower of cost, on the FIFO method, and net realizable value
- Financial assets: Fixed deposit with Vin Bank (8% p.a.) = R15,000
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