Question

6. Ubochi and Hassanah started a partnership business on 1st January, 2015. They contributed D300,000 and D250,000 respectively as capital. Their partnership deed stated that: (i) Interest of 8% should be paid on capital per annum, (ii) Hassanah would be paid D10,000 monthly as salary; (iii) interest on drawings is 5%; (iv) the profits are to be shared in the ratio 3:2 respectively. At the end of the year, the profit made was D300,000. During the period, Ubochi and Hassanah made drawings of D20,000 and D15,000 respectively. You are required to prepare: (a) Profit and Loss Appropriation Account for the year ended 31st December, 2015; (b) Partners' Current Accounts.

Accepted Answer

See the Profit and Loss Appropriation Account and Partners' Current Account tables in the Diagram column. Note: Hassanah's monthly salary of D10,000 gives an annual salary of D120,000 (D10,000 x 12); interest on capital is Ubochi D24,000 (8% x D300,000) and Hassanah D20,000 (8% x D250,000). After deducting salary and interest on capital from the net profit of D300,000, the remaining profit of D137,750 is shared 3:2 between Ubochi (D82,650) and Hassanah (D55,100). The Partners' Current Accounts show closing balances of D385,650 for Ubochi and D429,350 for Hassanah, after accounting for drawings and interest on drawings.

WAEC Accounting 2019 Theory — Question 6

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