Question

Bush, Home and Wilson are in partnership sharing profits & Losses in the ratio of 4.1.3 respectively. Their trail balance as at April 30 20X4 was as follows

	DR	CR
Sales		334,618
Returns inwards	10,200
Purchases	196,239
Carriage inwards	3,100
Stock at May 1 20X3	68,127
Discounts allowed	190
Salaries & wages	54,117
Bad debts	1,620
Provision for bad debts; April 30, 20X3		950
General expenses	1,017
Business rates	2,900
Electricity	845
Computers at cost	8,400
Equipment at cost	5,700
Provision for depreciation at April 30 20X3;
Computers		3,600
Equipment		2,900
Creditors		36,480
Debtors	51,320
Cash at bank	5,214
Capital Accounts;   Bush		60,000
Home		10,000
Wilson		30,000
Current Accounts; Bush		5,940
Home	2,117
Wilson		9,618
Drawings;   Bush	39,000
Home	16,000
Wilson	28,000
	494,106	494,106

Required

Draw up a Profit and loss appropriation account for the year ended April 30 20X4, Capital, Drawings , Current Accounts and the balance sheet as at that date taking into account the following notes (10 Marks)

1. Stock at April 30, 20X4 was 74,223/=
2. The following were paid in advance; business rates 200/= and electricity 68/=
3. Increase provision for bad debts to 1400/=
4. Salaries paid to partners but not entered in the books; Homes 18000/=, Wilson 14000/=
5. Interest on drawings; Bush 300/=, Home 200/= and Wilson 240/=
6. Interest paid on Capital accounts is 8%
7. Depreciation on computers 2800/=, Equipment 1100/=
8. Partners maintain fixed capital accounts

Answer 1

Solution

Bush, Home and Wilson

Income Statement for the year ending 30 April 20X4

Particulars		Amount ($)
Sales		334,618
Less Returns inwards		10.200
Net Sales		324,418 (i)
Less Cost of goods sold
Opening inventory	68,127
Add Purchases	196,239
Add Carriage inwards	3,100
Less Closing Inventory	(74,223)	193,243 (ii)
Gross Profit		131,175 (i-ii)
Less :Expenses
Salaries & Wages	54,117
Discounts allowed	190
Business rates (2,900-200)	2,700
Electricity (845-68)	777
Bad debts	1,620
Allowance for doubtful debts (1400-950)	450
General Expenses	1,017
Depreciation :
Computers 2,800
Office equipment 1,100	3,900
Total Expenses		64,771
Net Profit		66,404
Add Interest on Drawings
Bush	300
Home	200
Wilson	240
Total Interest on drawings		740
		67,144 (66,404+740)
Less: Salaries
Home	18,000
Wilson	14,000	32,000
Less : Interest on Capital
Bush	4,800
Home	800
Wilson	2,400	8,000
Profit		27,144 (67,144-32000-8000)
Balance of profit shared
Bush 1/2	13,572
Home 1/8	3,393
Wilson 3/8	10,179	27,144

Balance Sheet as at 30 April 20X4 ($)

Non Current Assets Cost Depreciation Net

Office Equipment 5,700 4,000 1,700

Computers 8,400 6,400 2,000

   14,100 10,400 3,700

Current Assets

Inventory 74,223

Accounts receivable 51,320

Less Allowance for doubtful debts 1,400   49,920

Prepayments (200 + 68) 268

Bank 5,214 129,625

Total 133,325 (3,700+129,625)

Current liabilities

Accounts payable 36,480

Net Working capital 96,845 (133,325-96,845)

Financed by:

Capital: Bush 60,000

Home 10,000

Wilson 30,000 100,000

Current accounts: Bush Home Wilson

Balances 1.5.2003 5,940 (2,117) 9,618

Add Salaries –    18,000 14,000

Add Interest on capital    4,800 800 2,400

Add Share of profit   13,572 3,393 10,179

Total 24,312 20,076 36,197

Less Drawings ( 39,000) (16,000) (28,000)

Interest on drawings ( 300) ( 200) ( 240)

Net current account balances   (14,988) 3,876 7,957 ( 3,155)

Net Balances     (100,000-3,155) = $96,845

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