Level: Easy
Easy Worked Examples: Accounting for Partnerships
Six graded examples for Chapter 4 Accounting for Partnerships, one concept each, from calculating interest on capital to preparing Capital and Current Accounts.
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Example 1: Interest on Capital
Question
Solution plan
Interest on capital = Opening capital x Rate. Multiply each opening capital by 5%. This interest is debited in the Appropriation Account and credited to each partner's Current Account.
| Partner | Capital (RM) | Rate | Interest on Capital (RM) |
|---|---|---|---|
| Aminah | 40,000 | 5% | 2,000 |
| Bakri | 30,000 | 5% | 1,500 |
| Total | 3,500 |
Answer
Interest on capital: Aminah RM2,000 and Bakri RM1,500. Total interest on capital is RM3,500.
Where marks are usually lost
Example 2: Interest on Drawings
Question
Solution plan
Interest on drawings = Drawings x Rate. It is charged to the partner because it reduces their share of profit: debit the partner's Current Account and credit the Appropriation Account.
| Partner | Drawings (RM) | Rate | Interest on Drawings (RM) |
|---|---|---|---|
| Chong | 8,000 | 10% | 800 |
| Devi | 6,000 | 10% | 600 |
| Total | 1,400 |
Answer
Interest on drawings: Chong RM800 and Devi RM600. Total interest on drawings is RM1,400.
Where marks are usually lost
Example 3: Partner's Salary and Equal Profit Sharing
Question
Solution plan
Deduct Halim's salary from net profit to get the distributable balance: RM50,000 - RM12,000 = RM38,000. Split the balance equally (÷2) = RM19,000 each. Halim receives both his salary and his share.
| Item | Halim (RM) | Ismail (RM) | Total (RM) |
|---|---|---|---|
| Salary | 12,000 | 12,000 | |
| Share of profit (equal) | 19,000 | 19,000 | 38,000 |
| Total received | 31,000 | 19,000 | 50,000 |
Net profit RM50,000 less salary RM12,000 = balance RM38,000 shared equally.
Answer
Halim receives RM31,000 (salary RM12,000 + profit share RM19,000) and Ismail receives RM19,000. The total distributed equals the net profit of RM50,000.
Where marks are usually lost
Example 4: Profit and Loss Appropriation Account (T-form)
Question
Solution plan
Credit net profit RM60,000. Debit the appropriations: interest on capital (RM2,500 + RM1,500 = RM4,000) and Kumar's salary RM6,000. Balance = RM60,000 - RM4,000 - RM6,000 = RM50,000, split equally (RM25,000 each). Both sides must balance at RM60,000.
| Particulars | RM | Particulars | RM |
|---|---|---|---|
| Interest on capital: Jaya | 2,500 | Net profit b/d | 60,000 |
| Interest on capital: Kumar | 1,500 | ||
| Salary: Kumar | 6,000 | ||
| Share of profit: Jaya | 25,000 | ||
| Share of profit: Kumar | 25,000 | ||
| 60,000 | 60,000 |
Answer
After interest on capital RM4,000 and Kumar's salary RM6,000, the remaining profit RM50,000 is shared equally: Jaya RM25,000 and Kumar RM25,000. Both sides balance at RM60,000.
Where marks are usually lost
Example 5: Current Account (Fixed Capital Method)
Question
Solution plan
Under the Fixed Capital Method, all rewards (interest on capital, salary, profit share) are credited and all charges (drawings, interest on drawings) are debited in the Current Account. Credits RM17,000, debits RM6,300; balance c/d = RM10,700 (credit balance).
| Particulars | RM | Particulars | RM |
|---|---|---|---|
| Drawings | 6,000 | Interest on capital | 2,000 |
| Interest on drawings | 300 | Salary | 5,000 |
| Balance c/d | 10,700 | Share of profit | 10,000 |
| 17,000 | 17,000 | ||
| Balance b/d | 10,700 |
Answer
Lim's Current Account shows a balance c/d of RM10,700 and a balance b/d of RM10,700 (credit). This means the business owes Lim RM10,700.
Where marks are usually lost
Example 6: Capital Account (Fluctuating Capital Method)
Question
Solution plan
Under the Fluctuating Capital Method, only one Capital Account is kept. Credit opening capital, interest on capital, salary and profit share (total RM65,000). Debit drawings and interest on drawings (RM5,500). Balance c/d = RM65,000 - RM5,500 = RM59,500.
| Particulars | RM | Particulars | RM |
|---|---|---|---|
| Drawings | 5,000 | Balance b/f (Capital) | 40,000 |
| Interest on drawings | 500 | Interest on capital | 2,000 |
| Balance c/d | 59,500 | Salary | 8,000 |
| Share of profit | 15,000 | ||
| 65,000 | 65,000 | ||
| Balance b/d | 59,500 |
Answer
Nurul's Capital Account shows a balance c/d of RM59,500 and a balance b/d of RM59,500 (credit). Nurul's capital grew from RM40,000 to RM59,500 because all rewards and drawings are recorded in one account.
Where marks are usually lost
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