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Principles Of Accounts May/June 2007

SECTION 1
Answer ALL questions in this section.

1.(a) List THREE distinguishing features of a partnership concern. (3 marks)

(b) Skerritt and Cymbal are in Partnership sharing profits and losses in the ratio of their capital balances. The following balances were left over in their books after the preparation of the Trading and Profit and Loss Account on September 30, 2006.

Capital Accounts:
Skerritt $30 000
Cymbal $40 000
Current Accounts:
Skerritt $(300)
Cymbal $1 500
Drawings
Skerritt $12 000
Cymbal $5 000
Motor Vehicle at cost $43 000
Buildings at cost $232 000
Debtors $23 300
Creditors $17 000
Stock at September 30, 2006 $18 000
Cash at bank $27 000

Additional information to be taken into consideration:
(1) The net profit for the year ended September 30, 2006 is $250 000. (2) Each partner earns an annual salary of $60 000.
(3) Interest on capital is to be paid at the rate of 5% per annum. (4) Interest on drawings is to be charged at the rate of 10% per annum. Skerritt drew cash on October 31, 2005 and Cymbal drew cash on March 31, 2006. (5) Accumulated depreciation on Motor Vehicles to September 30, 2006 is $8 600.

Required:
(i) Prepare the Profit and Loss Appropriation Account for Skerritt and Cymbal for the year ended September 30, 2006. (6 marks)

(ii) Prepare the Current Accounts of Skerritt and Cymbal on September 30, 2006. ( 5 marks)

(iii) Prepare the Balance Sheet of Skerritt and Cymbal as at September 30, 2006, showing the working capital. (Do not show details of the current accounts in the Balance Sheet. Transfer only the closing balances from the partner's current accounts.) (6 marks)
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