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O-LevelAccountingAccounting procedures7707/22 · Oct/Nov 2022 · Q520 Marks

Sian and Tom are in partnership sharing profits and losses in proportion to capital invested. The partnership agreement states the following: 1 interest on capital is allowed at 6% per annum 2 Sian is allowed a salary of $20000 per annum 3 interest on drawings is charged at 3% per annum, charged for each proportion of the year The profit for the year before appropriation for the year ended 31 March 2022 was $59190. Drawings made during the year were: Sian Tom $ $ 1 April 2021 8000 10000 1 October 2021 6000 12000 The capital account balances on 1 April 2021 were: $ Sian 150000 Tom 100000

  1. (a)Prepare the profit and loss appropriation account for Sian and Tom for the year ended 31 March 2022.[8]
  2. (b)Prepare the extract from the statement of financial position of Sian and Tom that shows the capital accounts and the full details of their current accounts at 31 March 2022.[8]
  3. (c)Explain the significance of a debit balance in a partner's current account.[2]
  4. (d)Explain the accounting principle of going concern.[2]

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

  1. [1] Sian interest on drawings (240 + 90)
  2. [1] Tom interest on drawings (300 + 180)
  3. [1] Sian interest on capital (150 000 x 6%)
  4. [1] Tom interest on capital (100 000 x 6%)
  5. [1] Sian salary
  6. [1] Sian share of profits (OF)
  7. [1] Tom share of profits (OF)
  8. [1] Capital Sian
  9. [1] Capital Tom
  10. [1] Current Account Balance b/d Sian (credit) and Tom (debit)
  11. [1] Interest on capital Sian
  12. [1] Interest on capital Tom (OF)
  13. [1] Salary Sian
  14. [1] Profit Sian (OF)
  15. [1] Profit Tom (OF)
  16. [1] Drawings Tom
  17. [1] Interest on drawings Tom (OF)
  18. [1] Total capital and current accounts OF
  19. [1] The amount the partner owes to the partnership
  20. [1] Indicates that the partner's drawings are too high
  21. [1] Indicates that the partner's drawings are greater than the total profit share
  22. [1] Assumes the business will operate for an indefinite period of time
  23. [1] Assumes there is no intention to close the business down / reduce the size of the business significantly
  24. [1] Non-current assets are valued at net book value / not expected sales value

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About this question

Topic
Accounting procedures, O-Level Accounting (syllabus 7707). Structured question, 20 marks.
Source
O-Level Accounting, Oct/Nov 2022 Paper 2 Variant 2, question 5.

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