Registered Posts: 1,800
morning

i am stuck and i have got these questions wrong previously. please can some one point me in the right direction.

1) A partnership makes a net profit for the year of £100,000. Partner A is entitled to £20,000 salary and 40% of the residual profit. Partner B is entitled to a salary of £10,000 and the balance of the residual profit. Draw up their appropriation account and current accounts (ignore opening balances).

2) A partnership makes a net profit for the year of £45,000. The total capital contributed by all the partners is £80,000. This earns interest in the appropriate account of 5% per annum. Residual profits are shared in the ration A3: B3: C4. Calculate A’s share of the residual profit after interest on capital.

if someone could help i would really appreciate it. my head is fuzzled from studying DFS and i am past help no wi think

Tracy

• Registered Posts: 1,800
can anyone help me at all?

Tracy
• Registered Posts: 141 ? ? ?
ok

1) you allocate salaries before profits

so firstly salaries

partner a = 20,000
partner b= 10,000

this is 30,000 from the 100,000 profit

so you have 70,000 profit left to apportion

partner a = 70,000*40% = 28000
partner b = 70000-28000=42000

so for
partners a total apportionment of profits = 48000
partners b total apportionment of profits = 52000

2) like above with salaries capital interest is deducted from total profits before final apportionment

so 80000*5% = 4000 capital interest (it doesnt say how this is allocated to partners)

so 45000-4000=41000 residual profits

partner a = 41000 * 3/10 = 12,300 share of residual profits

hth!
• Registered Posts: 1,800