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BA7 - Partnership App Accounts

  • 51 posts
  • # 115865

HELPPPPPPPPPPP

I have just done 2 BA7 mock exams and failed, some of which were silly mistakes but I really dont understand the "partnership Appropriation Accounts.

The question is:-

P, C & L are partners having invested £8000, £9000, £2000

They share profits equally

During the year partners have drawn the following:- P £7600, C £10400, L £500

at the end of the year before interest adj the business made £21643 profit

The business pays 5% int on capital into current accounts and deducts 5% interest on partners total drawings

Assuming there was no balance on the partners current accounts at the start of the year calculate the revised balances on the partners current accounts after profit shoaring and itnerest adju at the end of the year.

Will P C & L be DR OR CR and what will the figures be

i just cant get anwhere near what ICB answers are, any help gratefully received
  • 33 posts
  • # 115866

Hi Mandy

Calculate each partner's drawings interest and capital interest and post to individual current a,/cs.

Take profit (before adjustment), add total drawings interest back in to profit and deduct total capital interest. Remainder of profit is shared amongst partners according to p&l sharing ratio.

For partners current a/cs, as no b/d balance so just debit drawings and drawings interest and credit capital interest and profit share then balance.

Hope this helps 

Trish
  • 51 posts
  • # 115871

Hi Trish

thanks for taking the time to reply, thats exactly how i have been working it but ICB tell me that is wrong.

I have the following figures

P 374DR

C 3264DR

L 6781CR

I am very confused as how you explained is how i have always worked it out but clearly i am missing something 

confused.com
  • 33 posts
  • # 115872

Yep that's what I get too! 

Someone recently had similar issue on here with a vat question for BA4.

Looks very much like the error is in the online system.



Edited at 03 Nov 2017 12:15 PM GMT
  • 51 posts
  • # 115873

Hi Trish

i am clearly missing something because those figures are what ICB give but they do not match what i have 

could you explain how you get to those figures with workings out by anychance as i am around £8 out on each figure 

thanks

Mandy



Edited at 03 Nov 2017 10:51 AM GMT
  • 33 posts
  • # 115874

Ok I assumed when you said these were figures that you have you were talking about the answers you gave.

So ICB answers are correct!  Sorry ICB! 

 I can't see how your answers are out as no rounding.

Profit 21,643 + 925 DI - 950 CI = 21,618 ÷ 3 

7206 profit share

Any better!



Edited at 03 Nov 2017 12:13 PM GMT
  • 33 posts
  • # 115875

Sorry Mandy edited typo



Edited at 03 Nov 2017 12:14 PM GMT
  • 51 posts
  • # 115885

Morning Trish

I gave up last week, this morning i have done it first time, i dont know where i was getting the difference from, think i must have had brain fry.

 

thanks for all your help

M x
  • 33 posts
  • # 115886

Hi Mandy

I know that feeling :/

Thinking about it there was 25 quid difference between cap interest and drawings interest and split 3 ways is roughly 8 quid so maybe you just added when should have deducted.

Anyhoo main thing is you sussed it.

Best of luck with centre exam

Trish
  • 51 posts
  • # 115887

thanks Trish, i really dont know what i was doing.

 

Think i will do another mock before the real thing
st.tsoneva
  • 6 posts
  • # 116027

Mandy1975 said:

“

HELPPPPPPPPPPP

I have just done 2 BA7 mock exams and failed, some of which were silly mistakes but I really dont understand the "partnership Appropriation Accounts.

The question is:-

P, C & L are partners having invested £8000, £9000, £2000

They share profits equally

During the year partners have drawn the following:- P £7600, C £10400, L £500

at the end of the year before interest adj the business made £21643 profit

The business pays 5% int on capital into current accounts and deducts 5% interest on partners total drawings

Assuming there was no balance on the partners current accounts at the start of the year calculate the revised balances on the partners current accounts after profit shoaring and itnerest adju at the end of the year.

Will P C & L be DR OR CR and what will the figures be

i just cant get anwhere near what ICB answers are, any help gratefully received

”
First of all calculate the drawing interest at the end of the year:
P: 7600*5%=380
C: 10,400*5%=520
L: 500*5%=25
Total: £925
Then calculate the interest on capital each one should get:
P: 8000*5%=400
C: 9000*5%=450
L: 2000*5%=100
Total: £950
Out of the profit £21,643 you should pay interest on capital £950 and charge back £925 interest on drawings.
£21,643-950+925=£21,618
Profit is split equally: 21,618/3=£7,206
Then for each one of the partners:
Dr Drawings
Dr Drawings Interest
Cr Interest on capital
Cr Profit share

 
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