Ama, Baah and Cain are in partnership, providing management services, sharing profits in the ratio 5:3:2 after charging annual salaries of GH¢6,000 each. Current accounts are not maintained. On 30 June 2019, Ama retired and Doh was admitted into the partnership. Doh is entitled to 30% of the profits of the new partnership with the balance being shared equally between Baah and Cain. The old partnership trial balance as at 30 June 2019 was as follows:

The following information is relevant:
i) For the purposes of the accounts, inventory is to remain at GH¢2,000.
ii) Full provision is required at 30 June 2019 against a bad debt of GH¢1,150.
iii) It was agreed between the partners that the following adjustments are to be made:

• The investment is to be included in the books of the new partnership at a valuation of GH¢1,500.
• Goodwill, which is to be kept in the books of the new partnership, is to be valued at GH¢24,000.

iv) On 1 July 2019, GH¢10,000 of the amount due to Ama from the old partnership was trans-ferred to Doh. The balance due to Ama is to be repaid over three years, commencing on 1 July 2019.
v) On 1 July 2019 Doh introduced cash of GH¢7,500 to the partnership.
Required:
Prepare the Statement of Profit or Loss account and appropriation account of the OLD partnership for the year ended 30 June 2019.                                                                                                                                                                                  (10 marks)

When two or more individuals come together to form a Partnership, it is advisable to have a correctly drafted Partnership Agreement carefully detailing the terms of the business relationship. A partnership agreement is a contract between partners in a partnership which sets out the terms and conditions of the relationship between the partners.
Required:
Identify and explain FIVE key issues that should be covered in a partnership agreement when setting up a partnership.    (10 marks)

B & C Brothers are partners sharing profits and losses equally between themselves for many years. However, they have now decided to dissolve their partnership as at 31 December 2016. Below is their Statement of financial position as at 31 December, 2016:

Additional information:
At dissolution, the trade receivables realized was GH¢10,800,000 the land and buildings GH¢1,600,000 and the furniture and fittings GH¢3,800,000. The expenses incurred on dissolution were GH¢400,000 and discounts amounted to GH¢800,000 were received from suppliers.
Required:
Prepare
i) Realisation Account                                                                                                                                                         (5 marks)

ii) Cash Account                                                                                                                                                                  (3 marks)

iii) Partners’ Capital Account                                                                                                                                              (2 marks)

Mensah and Asamoah have been in partnership for several years. Up to 30th September 2015 the partnership agreement stated that there should be no partners’ salaries and partners should not receive any interest on capital put into the business. It was agreed that profit and losses were shared equally between Mensah and Asamoah.

Asamoah made a loan to the partnership during the year ended 31st May 2015 and no repayments have been made.

From 1st October 2015, the partners decided to change the partnership agreement and the terms were as follows.

(i) Interest on the partner’s loan account is to be 4% per annum.

(ii) Interest on partners’ capital accounts is to be 6% per annum.

(iii) Interest on partners’ total drawings is to be charged at 3% per annum. (For the period 1st October 2015 to 31st May 2016, interest on drawings were: Mensah GHȼ542; Asamoah GHȼ422).

(iv) Mensah’s partnership salary is to be GHȼ13,200 per annum.

(v) Profits and losses will be split between Mensah and Asamoah in the proportion 3:1 respectively.

(vi) No account has been taken of the interest on Asamoah’s loan. The draft profit for the year ended 31st May 2016 was GHȼ38,760. Profits were accrued evenly before allowing for loan interest.

vii) The following balances were extracted from the books of account for the year ended 31st May 2016.

Required:

Prepare the partners’ appropriation account for the year ended 31st May 2016, showing clearly the appropriation of profit for the periods:
i) 1st June 2015 – 30th September 2015 and

ii) 1st October 2015 – 31st May 2016.                                                                                                                            (11 marks)

Felicia, Jackson and Elizabeth are in Partnership Sharing Profits and Losses in the ratio of 5:3:2 respectively. According to the Partnership Agreement, Partners Capital Accounts attract an interest of 20% per annum. While any Drawings by a Partner also attract 10% interest per annum.

The following understated Trial Balance has been extracted after the preparation of the Profit and Loss Account for the period ending 31st December, 2014.

The following entries have not been recorded in the books.
(i) Salary of GH¢5,000 was paid to Elizabeth during the period.
(ii) Felicia personally paid General Expenses of GH¢2,500 on behalf of the
Partnership.
(iii) Cash Drawings made by partners: Felicia GH¢500, Jackson GH¢1,500 and
Elizabeth GH¢1,200.
(iv) Interest on loan – Elizabeth – GH¢2,000.
(v) Jackson took goods worth of GH¢2,000 for personal use.
(vi) Interest on Capital Account. All Capital Accounts were to remain fixed.
You are required to prepare:
i. Profit or Loss and Appropriation Account.                                                                                                                      (7 marks)

ii. Partners’ Current Account.                                                                                                                                              (3 marks)

iii. Statement of Financial Position as at 31st December, 2014.                                                                                         (5 marks)