K1 Partnerships

Written by Saad Rahman (ACCA)

ACCA · New at Knowledge level · 6 questions

Name: ____________________ Date: ____________

Two partners have no partnership agreement. How are profits shared?
- A Equally
- B In proportion to capital
- C According to who works the most hours
- D In proportion to drawings
Profit is $90,000. Partner A has a salary of $10,000. Interest on capital at 5 percent is $5,000 for A and $3,000 for B. The residual is shared 3:2. What is A's total share of the profit?
- A $43,200
- B $54,000
- C $60,000
- D $58,200
What does a partner's capital account normally record?
- A The partner's drawings
- B Interest on drawings
- C The partner's share of profit each year
- D The fixed amount of capital contributed
A partner is charged interest of $400 on drawings. What is the entry?
- A Debit bank, credit the current account
- B Debit the appropriation account, credit the partner's current account
- C Debit the partner's current account, credit the appropriation account
- D Debit the capital account, credit bank
A and B share profits 3:2 and C joins, with a new ratio of 2:2:1. Goodwill of $50,000 is created and then written off. What is the net effect on A's account?
- A A debit of $10,000
- B A credit of $10,000
- C No effect
- D A credit of $30,000
A debit balance on a partner's current account means that the partner:
- A Has contributed more capital
- B Is owed money by the partnership
- C Has drawn more than the partner's share of profit
- D Has left the partnership

Answer key

1. A, 2. D, 3. D, 4. C, 5. B, 6. C

Without an agreement, partners share profits equally.
Residual = 90,000 - 10,000 - 5,000 - 3,000 = 72,000. A gets 43,200 of it, so A's total = 10,000 + 5,000 + 43,200 = 58,200.
Drawings and profit shares go through the current account.
The interest reduces the partner's share and increases the profit available to share.
A is credited with 3/5 of 50,000 = 30,000 and debited with 2/5 of 50,000 = 20,000.
A debit balance shows an over-drawing.