Partnership Accounts Questions and Answers
We have covered various topics of Partnership such as Formation, Withdrawal of funds, Distribution of Profit & Loss, Revaluation of assets, retirement of partners and dissolution of partnership firm. Now, it is the right time to practice some more questions for these topic. So, here we will exercises of Partnership Accounts Questions and Answers.
Problem – Partnership Accounting for Formation
Ady and Beti are running their business as a sole traders in the chemical manufacturing sector. On July 1, 2011 their balance sheet showed the following balances of the accounts:
| Head | Ady | Beti |
| Cash | 64,000 | 80,000 |
| Debtors | 128,000 | 160,000 |
| Inventory | 160,000 | 80,000 |
| Office supplies | 8,000 | 6,400 |
| Furniture & fixture | 320,000 | 320,000 |
| Allowance for bad debt – furniture & fixture | 176,000 | 144,000 |
| Allowance for bad debts | 11,200 | 6,400 |
| Creditors | 128,000 | 152,000 |
On 1st July, 2011, Ady and Beti agreed to form a partnership by merging their business. They decided to take the assets and liabilities at the book value given above. By mutual decision, they decided to invest 400,000 and 360,000 in the business respectively and in case, any deficiency arises, they will contribute from their private funds.
Required
Record the journal entries of the newly established partnership firm as on July 01, 2011.
Construct a balance sheet of partnership firm as on 01 July, 2011. Take effect of the arrangement agreed by both partners regarding their capital investment.
Solution
General Journal Entries
| Date | Particulars | Debit | Credit |
| CashAccounts receivableInventoryOffice suppliesFurniture & fixtureAllowance for depreciation – furnitureAllowance for bad debtAccounts payableAdy Capital (balancing figure)(Recording of the investment of Ady in the partnership.) | 64,000128,000160,0008,000320,000 | 176,00011,200128,000364,800 | |
| CashAdi capital (400,000 – 364,800)(Additional investment by Ady from his private fund.) | 35,200 | 35,200 | |
| CashAccounts receivableInventoryOffice suppliesOffice furnitureAllowance for depreciation – furnitureAllowance for bad debtsAccounts payableBeti Capital (balancing figure)(Recording of the investment of Beti in the partnership.) | 80,000160,00080,0006,400320,000 | 144,0006,400152,000344,000 | |
| CashBeti Capital (360,000 – 344,000)(Additional investment by Beti from his private fund.) | 16,000 | 16,000 |
Balance Sheet
As at July 01, 2011
| Assets | Capital & Liabilities | ||
| CashAccounts receivable 288,000Allowance for bad debts (17,600)InventoryOffice suppliesFurniture & fixture 640,000Allowance for depreciation (320,000) | 195,200270,400240,00014,400320,000 | Accounts payableCapitalAdiBeti | 280,000400,000360,000 |
| 1,040,000 | 1,040,000 |