Question

3(a) Explain the term fixed capital account. (b) State three conditions that would result in a change in profit and loss sharing ratio of a partnership. (c) Outline three circumstances that would give rise to the creation of goodwill in a partnership.

Accepted Answer

(a) Fixed capital account: This is a fixed interest account with a maturity date. It is referred to as term deposit. The holder will give a notification if he intends to make withdrawal from the account before the maturity date.
(b) Conditions that can lead to change in profit sharing ratio of partners: i. Admission of new partner. ii. Death of a partner. iii. Retirement of a partner.
(c) Circumstances that can result in the creation of goodwill in a partnership business: i. Admission of new partner. ii. Revaluation of asset in the partnership business. iii. Conversion of the partnership business to a public company.

WAEC Accounting 2020 Theory — Question 3

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