First Previous - Page 1 of 1 - Next Last

BA5 - Partnership Adjustments

  • Associate
  • 3 posts
  • # 113727

Hi All,

Hope you are all well.

Is there anyone that can help me with the BA5 mock paper. I can not seem to get my head around Partnership Adjustments. This is the only section i seem to be losing marks on.

 

Thanks

Sarah

  • 75 posts
  • # 113728

Hello Sarah

 

Do you mean the adjustments for interest (capital and drawings), drawings and split of profits?



Edited at 02 Sep 2016 08:54 PM GMT

  • Associate
  • 3 posts
  • # 113732

Hi,

 

Sorry for the late reply. I have done two mock papers and the first one i am ok however the second one i keep losing marks on. This is the one where you have to put the negative or positive effect for each adjustment.

for example;

Barber and Todd are in partnership running a motor repair business. 

They share profits and losses 60 : 40

The final accounts have been drafted and the figures below show the current position. The partnership operates a standard accounting system for VAT purposes and all VAT due at the end of the year had been paid. 

Trial Balance as at 31 March 2014  
  £ £
Buildings at cost  180,000  
Machinery at cost 48,000  
Provision for depreciation on machinery   28,800
Motor vehicles at cost 36,200  
Provision for depreciation on motor vehicles   18,100
Debtors 19,600  
Creditors   25,480
Cash in hand 650  
Cash at bank 4,750  
Stock at 31/03/2014 9,580  
Bank Loan   38,000
Capital Accounts as at 01/04/2013:    
Barber   120,000
Todd   60,000
Current Accounts as at 01/04/2013:    
Barber 380  
Todd   12,600
Drawings as at 31 March 2014:    
Barber 32,500  
Todd 16,900  
Net profit before appropriations   45,580
  348,560 348,560
     

After the first draft of the profit and loss account had been drawn up the following were discovered, no entries for which have been made in the accounts:

  • A item of machinery that cost £8,000 and had been depreciated by 50% was sold for £3,000 plus VAT. The sale was for cash which had been paid into the bank.
  • No depreciation had been calculated on the motor vehicles, the annual percentage for which was 25% using the reducing balance method.
  • It is highly likely that a debtor who has owed £1,800 for at least eight months will not pay in the foreseeable future and it is agreed to make a provision for a bad debt for the entire amount.
  • On 31 March, Barber paid in a further £12,000 capital that was immediately used to pay off part of the long term loan.
  • On 31 March, Todd had withdrawn £29,000 from the bank.

Commencing with the draft net profit, show the effect on this figure of each of the above adjustments.  Note: if the adjustment increases net profit enter as a positive figure; if it decreases net profit enter as a negative figure and if it has no effect on net profit enter a zero. 

Enter the final net profit (or loss) - enter a profit as a positive figure and a loss as a negative figure. 

 

 

AdjustmentEffect        

Net profit brought forward      

Profit or loss on disposal of machinery

Depreciation of motor vehicles

Provision for doubtful debt

Introduction of capital amount

Part payment of loan

Additional partner's drawings taken

Amended net profit

  

What is the total of each of the following sections in the final balance sheet? 

Fixed Assets

Current Assets

Current Liabilities

Long Term Loan

 

Any tips or if you could point me in the right direction would be much appreciated.

 

Thank you

  • 75 posts
  • # 113733

Hello Sarah

No worries. I found the best way was to draw up an Extended Trial Balance. From this write up a profit and loss account and balance sheet very roughly for your own workings. You will then get a good basis for whether your workings are correct although this is not fool proof. I used this method and while at first I thought I was going the long way around the houses, it proved to be the most accurate and timely way that I found. Do you know what an ETB is? The reason I ask is that I don't remember seeing them in the Kaplan books as I self studied but I used then at A-Level and in AAT. If you don't know what they are have a look online or get in touch with me and I'll help you.

 

Thanks

 

Dean

  • Associate
  • 3 posts
  • # 113736

Thank you so much Dean!! {#emotions_dlg.smile}

After searching on the net for some info on extended trial balances, i have finally cracked it. I was up all night trying to get my head around adjustments and finally sat the exam this afternoon and passed. You were right the Level 3 ICB book does not cover ETB which is annoying as they've included it in the exam.

 

All the best!

  • 75 posts
  • # 113737

Excellent and well done. It's always good to knock the exams down so thatyou can move forwards. All the best.

 

Dean

  • Associate
  • 5 posts
  • # 114030

This is where I have lost marks I'm confident now but in the actual exam it said to put the loss as a negative figure do you do this as      -####.## or (####.##) I don't want to loose marks from doing it wrong in the retake!

First Previous - Page 1 of 1 - Next Last
loading