Partners’ Capital Accounts

FA – Mar 2023 – L1 – Q2 – Bad and doubtful debt | Control accounts and account reconciliations

Prepares control accounts, allowance for doubtful debts, revaluation account, partners' capital accounts, and adjusted financial position for a partnership.

Question

a) The following were extracted from the books of Pele Ltd by the close of December 2021:

Account	GH¢
Receivables ledger control account	71,400
Payables ledger control account	56,100

During the year 2022 the following transactions occurred:

Transaction	GH¢
Cash received from customers	47,700
Cash paid to suppliers	48,750
Sales on credit	72,300
Purchases on credit	54,750
Sales returns	2,850
Purchase returns	1,050
Discounts received from suppliers	600
Settlement discount claimed by customer	450
Bad debts written off	4,050
Customer and supplier accounts settled by contra	3,150

At 1 January 2022, the start of Pele Ltd’s financial year, the balance on the allowance for doubtful debts account was GH¢9,450. At 31 December 2022, the company’s management decided that the revised balance should be 10% of the year-end accounts receivable.

Required:

i) Prepare the receivables ledger control account and payables ledger control account for the year ended December 2022 and hence determine the balances at 31 December 2022. (7 marks)
ii) Prepare the allowance for doubtful debts account and bad debt expense account showing the necessary entries in respect of the financial year ended 31 December 2022. (3 marks)

b) Molu, Mbisi, and Mabiodun have been in practice under the name Moba Partners for many years sharing profits and losses in the ratio of 4:3:3. Mbisi decided to retire on 31 December 2022 due to her relocation to Spain. The Statement of Financial Position as at 31 December 2022 was as shown below:

Additional Information:

Interest should be charged on partners’ drawings at 5%. Each of the partners had withdrawn GH¢600,000 from the account.
Interest on partner’s capital account to be credited at 6%. Partners’ accounts for the purpose of the interest calculation are to be taken as follows: Molu GH¢2,100,000, Mbisi GH¢1,050,000, Mabiodun GH¢1,500,000.
Mbisi received GH¢240,000 paid by cheque immediately.
Goodwill was valued at GH¢3,000,000 and was to be retained in the books.
Other assets and liabilities were valued as follows:
- Freehold land and buildings: GH¢6,000,000
- Plant and machinery: GH¢2,400,000
- Office equipment: GH¢350,000
- Motor vehicles: GH¢1,560,000
Discount to be received from creditors amounted to GH¢270,000.
20% of the receivables were irrecoverable.
15% of inventory was obsolete.
The balance due to Mbisi is to be kept in the firm as a loan.

Required:

i) Prepare the revaluation account. (2 marks)
ii) Prepare the partners’ capital accounts. (4 marks)
iii) Prepare the adjusted statement of financial position. (4 marks)

Answer

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Tags: Doubtful Debts, Financial Position, Partners' Capital Accounts, Payables Ledger, Receivables Ledger, Revaluation Account
Level: Level 1

Topic: Bad and doubtful debt, Control accounts and account reconciliations
Series: MAR 2023

FA – Nov 2021 – L1 – Q2 – Accruals and prepayments | Preparation of Partnership accounts

Recording rent transactions and preparing financial statements related to the retirement of a partner, including revaluation and goodwill adjustments.

Question

a) Ansong is a sole proprietor whose accounting year is 1 November to 31 October. Ansong rents factory space at the cost of GHȼ10,000 per quarter, payable in advance. Payments for rent were made on 1 January, 1 April, 1 July, and 1 October during the year 2020.

Required:
i) Show the ledger entries to record the above transactions for the year ended 31 October 2020.
(4 marks)

ii) Prepare an extract for the Statement of Profit or Loss and Statement of Financial Position.
(1 mark)

b) Agyei, Bobo, and Dago have been in partnership for some years, sharing profits and losses in the ratio 3:2:1, respectively. The partnership statement of financial position as at 30 June 2020 was as follows:

Assets	GHȼ	GHȼ
Non-current assets
Premises		80,000
Office equipment		58,400
Motor vehicles		45,000
Total Non-current assets		183,400
Current assets
Inventory	28,600
Trade receivables	25,800
Bank	5,650
Total Current assets		60,050
Total assets		243,450
Capital and Liabilities
Capital accounts
Agyei	95,000
Bobo	60,000
Dago	50,000
Total Capital		205,000
Current accounts
Agyei	15,200
Bobo	7,040
Dago (debit balance)	(10,200)
Total Current accounts		12,040
Current liabilities
Trade payables		26,410
Total Capital and Liabilities		243,450

The partners have agreed that the following should take effect on 1 July 2020 upon the retirement of Dago:

Goodwill is to be valued at GHȼ60,000 and will not remain in the books of account.
Premises are to be revalued to GHȼ116,325.
Dago is to take inventory costing GHȼ8,400 and a Motor Vehicle with a net book value of GHȼ20,500 as part settlement of his capital.
A specific allowance for receivables is to be made for GHȼ5,300 owed by an individual customer. In addition, a general allowance for receivables is to be made at 5% of the remaining trade receivables.
Agyei and Bobo will continue in partnership, sharing profits and losses in the ratio 3:2.
Dago will transfer GHȼ12,000 to a loan account to be repaid in full in 2025. No loan interest will be charged on this amount.
The remaining balance from combining both Dago’s capital account and current account will be paid from the business bank account.

Required:
i) Prepare the partners’ capital accounts on 1 July 2020 to show the retirement of Dago.
(7 marks)

ii) Prepare the partnership statement of financial position as at 1 July 2020.
(8 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Goodwill, Partners' Capital Accounts, Prepayments, Rent, Retirement of Partner, Revaluation, Statement of Financial Position
Level: Level 1

Topic: Accruals and prepayments, Preparation of Partnership accounts
Series: NOV 2021

FA – Mar 2023 – L1 – Q2 – Bad and doubtful debt | Control accounts and account reconciliations

Prepares control accounts, allowance for doubtful debts, revaluation account, partners' capital accounts, and adjusted financial position for a partnership.

Question

a) The following were extracted from the books of Pele Ltd by the close of December 2021:

Account	GH¢
Receivables ledger control account	71,400
Payables ledger control account	56,100

During the year 2022 the following transactions occurred:

Transaction	GH¢
Cash received from customers	47,700
Cash paid to suppliers	48,750
Sales on credit	72,300
Purchases on credit	54,750
Sales returns	2,850
Purchase returns	1,050
Discounts received from suppliers	600
Settlement discount claimed by customer	450
Bad debts written off	4,050
Customer and supplier accounts settled by contra	3,150

Required:

Additional Information:

Interest should be charged on partners’ drawings at 5%. Each of the partners had withdrawn GH¢600,000 from the account.
Interest on partner’s capital account to be credited at 6%. Partners’ accounts for the purpose of the interest calculation are to be taken as follows: Molu GH¢2,100,000, Mbisi GH¢1,050,000, Mabiodun GH¢1,500,000.
Mbisi received GH¢240,000 paid by cheque immediately.
Goodwill was valued at GH¢3,000,000 and was to be retained in the books.
Other assets and liabilities were valued as follows:
- Freehold land and buildings: GH¢6,000,000
- Plant and machinery: GH¢2,400,000
- Office equipment: GH¢350,000
- Motor vehicles: GH¢1,560,000
Discount to be received from creditors amounted to GH¢270,000.
20% of the receivables were irrecoverable.
15% of inventory was obsolete.
The balance due to Mbisi is to be kept in the firm as a loan.

Required:

i) Prepare the revaluation account. (2 marks)
ii) Prepare the partners’ capital accounts. (4 marks)
iii) Prepare the adjusted statement of financial position. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Doubtful Debts, Financial Position, Partners' Capital Accounts, Payables Ledger, Receivables Ledger, Revaluation Account
Level: Level 1

Topic: Bad and doubtful debt, Control accounts and account reconciliations
Series: MAR 2023

FA – Nov 2021 – L1 – Q2 – Accruals and prepayments | Preparation of Partnership accounts

Recording rent transactions and preparing financial statements related to the retirement of a partner, including revaluation and goodwill adjustments.

Question

Required:
i) Show the ledger entries to record the above transactions for the year ended 31 October 2020.
(4 marks)

ii) Prepare an extract for the Statement of Profit or Loss and Statement of Financial Position.
(1 mark)

Assets	GHȼ	GHȼ
Non-current assets
Premises		80,000
Office equipment		58,400
Motor vehicles		45,000
Total Non-current assets		183,400
Current assets
Inventory	28,600
Trade receivables	25,800
Bank	5,650
Total Current assets		60,050
Total assets		243,450
Capital and Liabilities
Capital accounts
Agyei	95,000
Bobo	60,000
Dago	50,000
Total Capital		205,000
Current accounts
Agyei	15,200
Bobo	7,040
Dago (debit balance)	(10,200)
Total Current accounts		12,040
Current liabilities
Trade payables		26,410
Total Capital and Liabilities		243,450

The partners have agreed that the following should take effect on 1 July 2020 upon the retirement of Dago:

Goodwill is to be valued at GHȼ60,000 and will not remain in the books of account.
Premises are to be revalued to GHȼ116,325.
Dago is to take inventory costing GHȼ8,400 and a Motor Vehicle with a net book value of GHȼ20,500 as part settlement of his capital.
A specific allowance for receivables is to be made for GHȼ5,300 owed by an individual customer. In addition, a general allowance for receivables is to be made at 5% of the remaining trade receivables.
Agyei and Bobo will continue in partnership, sharing profits and losses in the ratio 3:2.
Dago will transfer GHȼ12,000 to a loan account to be repaid in full in 2025. No loan interest will be charged on this amount.
The remaining balance from combining both Dago’s capital account and current account will be paid from the business bank account.

Required:
i) Prepare the partners’ capital accounts on 1 July 2020 to show the retirement of Dago.
(7 marks)

ii) Prepare the partnership statement of financial position as at 1 July 2020.
(8 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Goodwill, Partners' Capital Accounts, Prepayments, Rent, Retirement of Partner, Revaluation, Statement of Financial Position
Level: Level 1

Topic: Accruals and prepayments, Preparation of Partnership accounts
Series: NOV 2021

Question Tag: Partners' Capital Accounts

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FA – Mar 2023 – L1 – Q2 – Bad and doubtful debt | Control accounts and account reconciliations

Prepares control accounts, allowance for doubtful debts, revaluation account, partners' capital accounts, and adjusted financial position for a partnership.

FA – Nov 2021 – L1 – Q2 – Accruals and prepayments | Preparation of Partnership accounts

Recording rent transactions and preparing financial statements related to the retirement of a partner, including revaluation and goodwill adjustments.

FA – Mar 2023 – L1 – Q2 – Bad and doubtful debt | Control accounts and account reconciliations

Prepares control accounts, allowance for doubtful debts, revaluation account, partners' capital accounts, and adjusted financial position for a partnership.

FA – Nov 2021 – L1 – Q2 – Accruals and prepayments | Preparation of Partnership accounts

Recording rent transactions and preparing financial statements related to the retirement of a partner, including revaluation and goodwill adjustments.

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FA – Mar 2023 – L1 – Q2 – Bad and doubtful debt | Control accounts and account reconciliations

Prepares control accounts, allowance for doubtful debts, revaluation account, partners' capital accounts, and adjusted financial position for a partnership.

You're reporting an error for "FA – Mar 2023 – L1 – Q2 – Bad and doubtful debt | Control accounts and account reconciliations"

FA – Nov 2021 – L1 – Q2 – Accruals and prepayments | Preparation of Partnership accounts

Recording rent transactions and preparing financial statements related to the retirement of a partner, including revaluation and goodwill adjustments.

You're reporting an error for "FA – Nov 2021 – L1 – Q2 – Accruals and prepayments | Preparation of Partnership accounts"

FA – Mar 2023 – L1 – Q2 – Bad and doubtful debt | Control accounts and account reconciliations

Prepares control accounts, allowance for doubtful debts, revaluation account, partners' capital accounts, and adjusted financial position for a partnership.

You're reporting an error for "FA – Mar 2023 – L1 – Q2 – Bad and doubtful debt | Control accounts and account reconciliations"

FA – Nov 2021 – L1 – Q2 – Accruals and prepayments | Preparation of Partnership accounts

Recording rent transactions and preparing financial statements related to the retirement of a partner, including revaluation and goodwill adjustments.

You're reporting an error for "FA – Nov 2021 – L1 – Q2 – Accruals and prepayments | Preparation of Partnership accounts"

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