Partnership Accounts Questions and Answers

Partnership Accounts Questions and Answers

We have covered various topics of Partnership such as Formation, Withdrawal of funds, Distribution of Profit & Loss, Revaluation of assets, retirement of partners and dissolution of partnership firm. Now, it is the right time to practice some more questions for these topic. So, here we will exercises of Partnership Accounts Questions and Answers.

Problem – Partnership Accounting for Formation

Ady and Beti are running their business as a sole traders in the chemical manufacturing sector. On July 1, 2011 their balance sheet showed the following balances of the accounts:

Head

Ady

Beti

Cash

64,000

80,000

Debtors

128,000

160,000

Inventory

160,000

80,000

Office supplies

8,000

6,400

Furniture & fixture

320,000

320,000

Allowance for bad debt – furniture & fixture

176,000

144,000

Allowance for bad debts

11,200

6,400

Creditors

128,000

152,000

 

On 1st July, 2011, Ady and Beti agreed to form a partnership by merging their business. They decided to take the assets and liabilities at the book value given above. By mutual decision, they decided to invest 400,000 and 360,000 in the business respectively and in case, any deficiency arises, they will contribute from their private funds.

Required

Record the journal entries of the newly established partnership firm as on July 01, 2011.

Construct a balance sheet of partnership firm as on 01 July, 2011. Take effect of the arrangement agreed by both partners regarding their capital investment.

Solution

General Journal Entries

Date

Particulars

Debit

Credit

 

Cash

Accounts receivable

Inventory

Office supplies

Furniture & fixture

Allowance for depreciation – furniture

Allowance for bad debt

Accounts payable

Ady Capital (balancing figure)

(Recording of the investment of Ady in the partnership.)

64,000

128,000

160,000

8,000

320,000

176,000

11,200

128,000

364,800

 

Cash

Adi capital (400,000 – 364,800)

(Additional investment by Ady from his private fund.)

35,200

35,200

 

Cash

Accounts receivable

Inventory

Office supplies

Office furniture

Allowance for depreciation – furniture

Allowance for bad debts

Accounts payable

Beti Capital (balancing figure)

(Recording of the investment of Beti in the partnership.)

80,000

160,000

80,000

6,400

320,000

144,000

6,400

152,000

344,000

 

Cash

Beti Capital (360,000 – 344,000)

(Additional investment by Beti from his private fund.)

16,000

16,000

 

Balance Sheet

As at July 01, 2011

Assets

Capital & Liabilities

Cash

Accounts receivable 288,000

Allowance for bad debts (17,600)

Inventory

Office supplies

Furniture & fixture 640,000

Allowance for depreciation (320,000)

195,200

270,400

240,000

14,400

320,000

Accounts payable

Capital

Adi

Beti

280,000

400,000

360,000

 

1,040,000

 

1,040,000