Partnership Admission – NBC Institute

FA – May 2014 – L1 – SB – Q4 – Partnership Accounts

Admission of a new partner, profit sharing, and preparation of capital and current accounts.

Question

Biggy and Smallie were in partnership, sharing profits and losses in the ratio 2:1. They agreed to admit Fanny into the partnership from 1 January 2012. Fanny is to introduce N140,000, out of which N130,000 is to be his fixed capital. He is to receive a commission of N30,000 per annum in addition to a share of profit. The new profit-sharing ratio is 2:2:1 to Biggy, Smallie, and Fanny, respectively. Other provisions of the Partnership Deed are:

(i) Debit balance in current accounts at the beginning of the year is to attract 5% interest.
(ii) Goodwill is valued at N150,000. No account for goodwill is to be retained in the partnership books.
(iii) Details of the existing partners’ fixed capital and current accounts for the purpose of the agreement are:

Partner	Fixed Capital (N)	Current Account (N)
Biggy	360,000	100,000
Smallie	240,000	(60,000) DR

(iv) The draft final accounts for the year ended 31 December 2012, before taking into account Fanny’s commission and interest on partners’ current accounts, revealed a profit of N347,000.
(v) The drawings made by the partners are:

Partner	Drawings (N)
Biggy	95,000
Smallie	45,000
Fanny	73,900 (including commission)

You are required to prepare:

a. A statement showing the sharing of profit for the year ended 31 December 2012. (5 Marks)
b. The Partners’ capital and current accounts for the year ended 31 December 2012. (10 Marks)

Answer

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Tags: Capital Accounts, Current Accounts, Partnership Admission, Profit Sharing
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2014

FA – April 2022 – L1 – Q2 – Bad and doubtful debt | Preparation of Partnership accounts

Preparation of bad debts, provision for bad debts accounts, and accounting for the admission and retirement of partners in a partnership.

Question

a) Nkrumah runs a small business with total annual sales of GHȼ50,000. He has been reviewing the outstanding balances on his customers’ accounts and has provided the following aged analysis of trade receivables as at 31 March 2020.

Nkrumah’s credit policy is payment within 30 days. The provision for bad debt as at 1 April 2019 was GHȼ880. Nkrumah’s policy for overdue and irrecoverable debts is to:

Write off as an irrecoverable debt any debt outstanding for over 12 months.
Create specific provision for any debts outstanding between 4 and 12 months.
Make no provision for debts up to 1 month old.
Create a general provision of 4% for all other debts.

Required:
i) Prepare and balance off the following ledger accounts for Nkrumah for the year ended 31 March 2020:

Tetteh
Abena
Irrecoverable Debts
Provision for Bad Debts
(6 marks)

ii) Prepare the Statement of Profit and Loss extract for irrecoverable debts and provision for bad debts for the year ended 31 March 2020.
(2 marks)

iii) Prepare the Statement of Financial Position extract for receivables as at 31 March 2020.
(2 marks)

b) The admission and retirement of a partner in a firm can only be done if all the existing partners have given consent unless otherwise agreed upon. At the time of admitting or retiring a partner, a new agreement is entered into and the firm is redesigned.

When a partner is admitted or retired in a partnership, some steps (procedures) are followed when accounting for his/her admission or retirement.

Required:
i) Detail the steps required when accounting for admission of a new partner.
(6 marks)
ii) Detail the steps required when accounting for the retirement of a partner.
(4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Bad Debts, Financial Statements, Partnership Admission, Partnership Retirement, Provision for Bad Debts
Level: Level 1

Topic: Bad and doubtful debt, Preparation of Partnership accounts
Series: APR 2022

FA – May 2014 – L1 – SB – Q4 – Partnership Accounts

Admission of a new partner, profit sharing, and preparation of capital and current accounts.

Question

Partner	Fixed Capital (N)	Current Account (N)
Biggy	360,000	100,000
Smallie	240,000	(60,000) DR

Partner	Drawings (N)
Biggy	95,000
Smallie	45,000
Fanny	73,900 (including commission)

You are required to prepare:

a. A statement showing the sharing of profit for the year ended 31 December 2012. (5 Marks)
b. The Partners’ capital and current accounts for the year ended 31 December 2012. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Accounts, Current Accounts, Partnership Admission, Profit Sharing
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2014

FA – April 2022 – L1 – Q2 – Bad and doubtful debt | Preparation of Partnership accounts

Preparation of bad debts, provision for bad debts accounts, and accounting for the admission and retirement of partners in a partnership.

Question

Nkrumah’s credit policy is payment within 30 days. The provision for bad debt as at 1 April 2019 was GHȼ880. Nkrumah’s policy for overdue and irrecoverable debts is to:

Write off as an irrecoverable debt any debt outstanding for over 12 months.
Create specific provision for any debts outstanding between 4 and 12 months.
Make no provision for debts up to 1 month old.
Create a general provision of 4% for all other debts.

Required:
i) Prepare and balance off the following ledger accounts for Nkrumah for the year ended 31 March 2020:

Tetteh
Abena
Irrecoverable Debts
Provision for Bad Debts
(6 marks)

ii) Prepare the Statement of Profit and Loss extract for irrecoverable debts and provision for bad debts for the year ended 31 March 2020.
(2 marks)

iii) Prepare the Statement of Financial Position extract for receivables as at 31 March 2020.
(2 marks)

When a partner is admitted or retired in a partnership, some steps (procedures) are followed when accounting for his/her admission or retirement.

Required:
i) Detail the steps required when accounting for admission of a new partner.
(6 marks)
ii) Detail the steps required when accounting for the retirement of a partner.
(4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Bad Debts, Financial Statements, Partnership Admission, Partnership Retirement, Provision for Bad Debts
Level: Level 1

Topic: Bad and doubtful debt, Preparation of Partnership accounts
Series: APR 2022

Question Tag: Partnership Admission

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FA – May 2014 – L1 – SB – Q4 – Partnership Accounts

Admission of a new partner, profit sharing, and preparation of capital and current accounts.

FA – April 2022 – L1 – Q2 – Bad and doubtful debt | Preparation of Partnership accounts

Preparation of bad debts, provision for bad debts accounts, and accounting for the admission and retirement of partners in a partnership.

FA – May 2014 – L1 – SB – Q4 – Partnership Accounts

Admission of a new partner, profit sharing, and preparation of capital and current accounts.

FA – April 2022 – L1 – Q2 – Bad and doubtful debt | Preparation of Partnership accounts

Preparation of bad debts, provision for bad debts accounts, and accounting for the admission and retirement of partners in a partnership.

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FA – May 2014 – L1 – SB – Q4 – Partnership Accounts

Admission of a new partner, profit sharing, and preparation of capital and current accounts.

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FA – April 2022 – L1 – Q2 – Bad and doubtful debt | Preparation of Partnership accounts

Preparation of bad debts, provision for bad debts accounts, and accounting for the admission and retirement of partners in a partnership.

You're reporting an error for "FA – April 2022 – L1 – Q2 – Bad and doubtful debt | Preparation of Partnership accounts"

FA – May 2014 – L1 – SB – Q4 – Partnership Accounts

Admission of a new partner, profit sharing, and preparation of capital and current accounts.

You're reporting an error for "FA – May 2014 – L1 – SB – Q4 – Partnership Accounts"

FA – April 2022 – L1 – Q2 – Bad and doubtful debt | Preparation of Partnership accounts

Preparation of bad debts, provision for bad debts accounts, and accounting for the admission and retirement of partners in a partnership.

You're reporting an error for "FA – April 2022 – L1 – Q2 – Bad and doubtful debt | Preparation of Partnership accounts"

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