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The partner who is leaving should be paid all the amounts due to him. This includes:
a) Capital balance
This will be all the amounts the partner has invested in the firm. Some firms may not be
able to refund the amount in full and therefore it may be transferred t o a loan account
whereby interest will be paid on the balance.
(b) Goodwill
Because this partner contributed to the improvement (existence) of the partnership therefore
it will be fair to pay him his share of the goodwill. Goodwill is introduced to the accounts
in the old profit sharing ratio ((i.e.) credited to all the partner’s capital accounts in the old profit sharing ratio), then written off from the accounts by debiting the capital accounts of the remaining partners in the new profit share ratio.
(c) Credit balance on the current account
This amount due to the partner is paid directly from the cashbook or transferred to the
Capital account whereby the total cash payable is to be determined.
The transfer is made by:
Dr. Current account
Cr. Capital account
(d) Share of profits
If the retirement takes place during the financial period, then the retiring partner is entitled to take profits made up to the point of retirement. Any interest of capital, salaries and balance of profit shared in profit share ratio will be credited to the partner’s current account. Therefore the profit and loss account will be split between the two periods and appointment of profits done and this will be based on the terms of the partnership in each period.
Titany answered the question on December 10, 2021 at 12:26
- The following was the partnership trial balance as at 30 April 2009
(Solved)
The following was the partnership trial balance as at 30 April 2009:
5. On 30 April, the stock was valued at Sh.1, 275,000.
6. Salaries included the following partners’ drawings:
Rotich Sh.150, 000, Sinei Sh.120, 000 and Tonui Sh. 62,500
7. A difference in the books of Sh.48,000 had been written off at 30 April 2009 to general
expenses, which was later found to be due to the following clerical errors:
- Sales returns of Sh. 32,000 had been debited to sales returns but had not been posted to
the account of the customer concerned;
-The purchases journal had been undercast by Sh.80,000
8. Doubtful debts (for which full provision was required) amounted to Sh.30, 000 and Sh.40,
000 as at 31 October 2008 and 30 April 2009respectively.
9. On 30 April 2008 rates and rent paid in advance amounted to Sh.50, 000 and a provision of
Sh.15, 000 for electricity consumed was required.
Required:
a) Trading and profit and loss account for the year ended 30 April 2009.
b) Partners’ current accounts for the year ended 30 April 2009
c) Balance sheet as at 30 April 20019
Date posted: December 10, 2021. Answers (1)
- Alan, Bob and Charles are in partnership sharing profits and losses in the ratio 3:2:1 respectively(Solved)
Alan, Bob and Charles are in partnership sharing profits and losses in the ratio 3:2:1 respectively
Date posted: December 10, 2021. Answers (1)
- A, B, and C are trading as partners sharing profits and losses in the ratio of 2:2:1. They have the following assets and liabilities at...(Solved)
A, B, and C are trading as partners sharing profits and losses in the ratio of 2:2:1. They have the following assets and liabilities at the book values and they wish to restate these values at market values and agreed values.
Date posted: December 10, 2021. Answers (1)
- A and B have been trading as partners sharing profits and losses equally. They decided to change
profit sharing ration to 3:2. The capital balances are:
A:...(Solved)
A and B have been trading as partners sharing profits and losses equally. They decided to change
profit sharing ration to 3:2. The capital balances are:
A: - Sh.1, 000,000
B: - Sh.1, 500,000
Goodwill has been agreed at Sh.500, 000.
Required: The partner’s capital balances assuming that:
1) Goodwill is to be retained in the accounts
2) Goodwill is to be written off form the accounts.
Date posted: December 10, 2021. Answers (1)
- Factors that contribute to goodwill(Solved)
Factors that contribute to goodwill
Date posted: December 10, 2021. Answers (1)
- Define the term goodwill(Solved)
Define the term goodwill
Date posted: December 10, 2021. Answers (1)
- The following list of balances as at 30 September 2009 has been extracted from the books of
Brick and Stone, trading partnership, sharing the balance of...(Solved)
The following list of balances as at 30 September 2009 has been extracted from the books of
Brick and Stone, trading partnership, sharing the balance of profits and losses in the proportions
3:2 respectively.
Required:
(a) Prepare a trading and profit loss account for the year ended 30 September 2009.
(b) Prepare a balance sheet as at 30 September 2009 which should include summaries of the
partners’ capital and current accounts for the year ended on that date.
Note: In both (a) and (b) vertical forms of presentation should be used.
Date posted: December 10, 2021. Answers (1)
- Draw up a profit and loss appropriation account for the year ended 31 December 2007
(Solved)
Draw up a profit and loss appropriation account for the year ended 31 December 2007
i. Net profits sh30,350
ii. Interest to be charged on capitals: W sh2,000; Psh1,500; H sh900
iii. Interest to be charged on drawings; W sh240; P sh180; H sh130
iv. Salaries to be credited: P sh2,000; H sh3,500.
v. Profits to be shared: W 50%; P 30%; H20%.
vi. Current accounts: balances b/f W sh1,860; P sh946; H sh717
vii. Capital accounts: balances b/f W sh40,000; P sh30,000; H sh18,000
viii. Drawings: W sh9,200; P sh7,100; H sh6,900.
Date posted: December 10, 2021. Answers (1)
- Read the following and answer the questions below.
A and B own a grocery shop. Their first financial year ended on 31 December 2002.
The following balances...(Solved)
Read the following and answer the questions below.
A and B own a grocery shop. Their first financial year ended on 31 December 2002.
The following balances were taken from the books on that date:
Date posted: December 10, 2021. Answers (1)
- Contents of partnership agreement (Solved)
Contents of partnership agreement
Date posted: December 10, 2021. Answers (1)
- Bibi Maridadi owns and manages a small manufacturing business. The following balances have
been extracted from her books of account at 31 January 2009(Solved)
Bibi Maridadi owns and manages a small manufacturing business. The following balances have
been extracted from her books of account at 31 January 2009:
Required:
Using the vertical method, prepare Bibi Maridadi’s manufacturing, trading and profit and loss
account for the year ended 31 January 1986 and a balance sheet as at that date.
Date posted: December 10, 2021. Answers (1)
- Define the term work in progress(w-i-p)(Solved)
Define the term work in progress(w-i-p)
Date posted: December 10, 2021. Answers (1)
- Categories of direct and indirect costs(Solved)
Categories of direct and indirect costs
Date posted: December 10, 2021. Answers (1)
- Define direct and indirect costs(Solved)
Define direct and indirect costs
Date posted: December 10, 2021. Answers (1)