Profit Share - Kaplan Mock Assessment

RachaelS
RachaelS Registered Posts: 3
Hi everyone,
I am just doing some last minute revision for my FAPR exam next week and have completed the mock assessment in the Kaplan text book. The last task involves the preparation of the appropriation account and includes the following for one of the partners as :
Salary - £8000
Interest on Capital £3200
The remaining profit once all is calculated is £4120 of which this partner receives 40% - £1648.

The question asks what the share of the profit or loss is for this partner which I presumed was £1648 however the answer is £12,848 as Kaplan have included his salary and the interest on capital aswell.
If I get a similar question in the exam and it is not made clear, do I presume profit share means before appropriation has taken place or after ? Any advice welcomed, thanks

Comments

  • Krisso
    Krisso Registered Posts: 34
    I remember this question. The kaplan answer is correct.

    You have £24,920 of profits for approptiation and the total shared between the 3 partners will also total £24920. Top and bottom figure will always reconcile to zero. So for the example above Bretts share is as you say £1648 of the residual profits after the deduction of the salaries and interest but he has still had the salary and interest from the Gross profits so that has to be added back into his share. So residual profits (£1648) + Salary (£8000) + Interest on capital (£3200) = £12,848

    Always remember that the appropriated profits between the partners will equal the gross profits before appropriation and you will never go wrong
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