Akila and Darius are in partnership. The partnership agreement provides for the following: interest on capital of 3% per annum interest on drawings of 5% a salary to Akila of $9500 per annum residual profits and losses to be shared 60% to Akila and 40% to Darius. The partners provided the following list of balances. $ Capital accounts at 1 May 2022 Akila | 90000 Darius | 65000 Current accounts at 1 May 2022 Akila | 2600 debit Darius | 4745 credit Drawings for the year ended 30 April 2023 Akila | 19400 Darius | 16320 The profit for the year ended 30 April 2023 was $42 304.

Mark scheme

Marking points from the official mark scheme (May/June 2023). The mark or mark type is shown in brackets.

1. [1] Profit for the year $42 304
2. [1] Add interest on drawings: Akila 970, Darius 816
3. [1] Less Interest on capital: Akila 2700, Darius 1950
4. [1] Less Salary - Akila 9500
5. [1] Profit share Akila 17964 (OF)
6. [1] Profit share Darius 11976 (OF)
7. [1] May 1 Balance b/d (Debit) 2600
8. [1] Apr 30 Drawings (Debit) 19400
9. [1] Apr 30 Interest on drawings (Debit) 970 (OF)
10. [1] Apr 30 Interest on capital (Credit) 2700 (OF)
11. [1] Apr 30 Salary (Credit) 9500
12. [1] Apr 30 Profit share (Credit) 17964 (OF)
13. [1] Apr 30 Balance c/d (Debit) 7194 (OF)
14. [1] May 1 Balance b/d (Credit) 7194 (OF)
15. [1] Calculation 7194OF + 1000 (interest on loan) – 600 (reduction in profit share)
16. [1] Answer 7594OF
17. [1] Amount of capital to be invested by each partner
18. [1] Any limit on drawings
19. [1] Interest on partners' loans (Max 2)
20. [1] Advantages – forming a limited company: May be easier to raise funds
21. [1] Advantages – forming a limited company: Company is a separate legal identity
22. [1] Advantages – forming a limited company: Shareholders have limited liability
23. [1] Advantages – forming a limited company: Continuity of existence
24. [1] Advantages – forming a limited company: May improve reputation / standing of the business (Max 2)
25. [1] Disadvantages – forming a limited company: Maybe increase administration costs
26. [1] Disadvantages – forming a limited company: Maybe costly to establish
27. [1] Disadvantages – forming a limited company: More legal requirements
28. [1] Disadvantages – forming a limited company: More complex accounting required / have to produce annual financial statements
29. [1] Disadvantages – forming a limited company: More information about the business may be made public (Max 2)
30. [1] Recommendation