1
Penrose and Wilcox are in partnership, sharing profits and losses in the ratio 3 : 2. The following
information was taken from their books for the year ending 31 December 2009, before the
completion of their profit and loss appropriation account.
£
Current accounts (1 January 2009)
Penrose 640 (Dr)
Wilcox 330 (Cr)
Drawings Penrose 3,000
Wilcox 2,000
Net trading profit 6,810
Interest on capital Penrose 540
Wilcox 720
Salary Penrose 2,000
Interest on drawings Penrose 270
Wilcox 180
(a) Prepare, for the year ending 31 December 2009:
(i
) the profit and loss appropriation account of Penrose and Wilcox;
(ii
) the current accounts in the ledger for Penrose and Wilcox.
(b) Why in many partnerships are current accounts prepared as well as capital accounts?
(c) At 1 January 2009 Penrose had a debit balance in his current account. What does this mean?
(d) In partnership accounts what is the purpose of preparing:
(i
) a profit and loss account?
(ii
) a profit and loss appropriation account?
(e) In partnership accounts why is:
(i
) interest allowed on capital?
(ii
) interest charged on drawings?
(Northern Examinations and Assessment Board: GCSE)