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Aat FSTP Focus Notes 2014 - External Student
Aat FSTP Focus Notes 2014 - External Student
AQ2013 Level 3
FOCUS NOTES
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
ii
K A P LA N P UB L I S H I N G
CONTENTS
CHAPTER
TITLE
PAGE
Partnerships
11
Incomplete records
33
Answers to examples
49
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KAPLAN P UBLI S H I N G
iii
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
iv
K A P LA N P UB L I S H I N G
Learning objectives:
At the end of this chapter you will be able to:
understand how to prepare the accounts for a sole trader from a trial balance
Contents:
1
Introduction
Summary
KAPLAN P UBLI S H I N G
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Introduction
Partnership accounting
Incomplete records
Assessment of FSTP:
K A P LA N P UB L I S H I N G
Sales revenue
Less: sales returns
Opening inventory
Purchases
Purchase returns
Carriage inwards
Closing inventory
Cost of goods sold
Gross profit
Add: Sundry income:
Discount received
Interest received
Gain on disposal of non-current asset
Expenses:
Discounts allowed
Rent
Carriage outwards
Electricity
Depreciation
Irrecoverable debt
Allowance for doubtful debt adjustment
Stationery
Telephone
Total expenses
Net profit (loss) for the year
KAPLAN P UBLI S H I N G
X
X
(X)
X
(X)
X
(X)
(X)
X
X
X
X
X
X
X
X
X
X
X
X
(X)
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Non-current assets:
e.g. land and buildings
X
X
Current assets:
Inventory
X
Trade receivables
X
Less allowance for receivables
(X)
X
X
Prepayments
X
Bank
X
(X)
Net current assets/ (liabilities)
Non-current liabilities:
Bank loan 20X5
Net assets
Financed by:
Capital
Add: Profit/(Loss) for the year
Less: Drawings
Carrying
amount
X/(X)
(X)
X
X/(X)
(X)
K A P LA N P UB L I S H I N G
Dr
Cr
365,200
266,800
23,340
25,680
25,680
46,160
13,000
3,720
760
17,330
23,004
4,560
120
588
864
1,622
20,800
200,000
24,000
12,240
28,000
16,800
170,000
645,134
645,134
Task:
Prepare the statement of profit or loss and the statement of financial position of Hardy
from the available information.
The answer to the above example can be found in Chapter 4.
KAPLAN P UBLI S H I N G
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Solution:
Hardy trading as Design Gecko
Statement of profit or loss for the year ended 31 December 20X9
Sales revenue
Opening inventory
Purchases
Closing inventory
Gross profit
Sundry income:
Discounts received
Expenses:
Wages
Printing and stationery
Motor expenses
Computer consumables
Irrecoverable debts
Discounts allowed
Total expenses
K A P LA N P UB L I S H I N G
Accumulated
depreciation
Carrying
amount
Non-current assets:
Land
Fixtures & fittings
Motor vehicles
Current assets:
Inventory
Trade receivables
Less: allowance for doubtful debts
Prepayments
Bank
Net assets
Capital account:
Capital account
Add: net profit for the year
Less: drawings
KAPLAN P UBLI S H I N G
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Summary
K A P LA N P UB L I S H I N G
Q17 Balfour
If you are attending a revision course, please do not attempt the revision kit questions
until your tutor instructs you to do so.
KAPLAN P UBLI S H I N G
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
10
K A P LA N P UB L I S H I N G
Partnerships
Learning objectives:
At the end of this chapter you will be able to:
apply the principles of accounting for admission of a partner, including accounting for
goodwill
apply the principles of accounting for retirement of a partner, including accounting for
goodwill
Contents:
1
10
11
Retirement of a partner
12
13
Accounts of a partnership
14
15
Summary
16
KAPLAN P UBLI S H I N G
11
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Each partner will have both a capital account and a current account.
Appropriation account
12
Salary
K A P LA N P UB L I S H I N G
P AR TNER SH IP S : C HA P T ER 2
Total
X
(X)
(X)
X
X
(X)
X
X
(X)
X
X
(X)
Total
X
(X)
(X)
(X)
(X)
X
X
(X)
(X)
Note: The appropriation of profit between the partners will be identical whichever format
of appropriation account is used.
Note: The share of profit or loss for each partner is then transferred to their individual
current account.
KAPLAN P UBLI S H I N G
13
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Drawings
Int on drawings
Balance c/d
Residual loss
Detail
Balance b/d
Salary
Int on capital
Residual profit
40,000
(1,200)
38,800
Residual profit
Residual profit allocation:
A (38,810 60%)
B (38,810 40%)
(23,286)
(15,514)
Nil
Detail
Balance b/d
Salary
Int on capital
Residual profit
Drawings
Int on drawings
Balance c/d
14
Detail
1,200
23,286
15,514
K A P LA N P UB L I S H I N G
P AR TNER SH IP S : C HA P T ER 2
Sam has a balance on his capital account of 32,000, and Sally has a capital account
balance of 48,000.
Sally will receive a salary of 10,000 for the year for taking on the responsibility of
writing up the accounting records during the year.
Residual profits are to be allocated between Sam (2/3) and Sally (1/3).
Tasks:
Part (a) Prepare the appropriation account of the partnership for the year.
Part (b) Prepare the appropriation account for the partnership for the year if the net
profit for the year was only 14,400.
The answer to the above example can be found in Chapter 4.
Solution:
(a)
Net profit for
the year
Partners
Sam
Sally
Residual profit
Sam
Sally
To current accounts
KAPLAN P UBLI S H I N G
15
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
(b)
Net profit for
the year
Partners
Sam
Sally
To current accounts
Note that the appropriation of salary and interest on capital take place as normal,
with the resulting residual profit or loss then allocated accordingly.
Interest on drawings 5%
Task:
Prepare the appropriation account of the partnership for the year, together with the
current accounts for each of the partners.
The answer to the above example can be found in Chapter 4.
16
K A P LA N P UB L I S H I N G
P AR TNER SH IP S : C HA P T ER 2
Solution:
Net profit for
the year
Partners
Paula
Jane
Residual loss
Paula
Jane
To current accounts
Current accounts of the partners:
Current accounts
Detail
Paula
Jane
Paula
Jane
Balance b/d
Salary
Int on capital
Drawings
Int on drawings
Share of loss
Balance c/d
Detail
Split profit or loss for the year based upon date of change of partnership
KAPLAN P UBLI S H I N G
17
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Split profit or loss for the year based upon date of change of partnership
Total
40,000
9/12
30,000
3/12
10,000
(375)
(1,275)
38,350
(900)
29,100
X
(17,460)
(11,640)
Nil
(375)
(375)
9,250
X
(3,700)
(3,700)
(1,850)
(21,160)
(15,340)
(1,850)
Nil
18
K A P LA N P UB L I S H I N G
P AR TNER SH IP S : C HA P T ER 2
Cagney was to receive an annual salary of 2,500 and Lacey an annual salary of
1,500
The residual profit was to be split equally between the two partners.
At 1 May 20X1, Cagney had a capital account credit balance of 20,000 and Lacey had a
capital account credit balance of 14,000.
Starsky was admitted to the partnership on 1 February 20X2 and introduced capital of
10,000 into the business. From that date, the partners agreed the following:
Partner salaries: Cagney 2,500 for the year; Lacey 1,500 for the year and Starsky
1,000 for the period 1 February to 30 April 20X2.
Interest on capital accounts: 10% per annum on the balance invested on a monthly
basis. At that date, the capital account of Cagney was 20,000, and for Lacey it was
14,000.
The net profit for the year ended 30 April 20X2 was 50,000.
Task:
Prepare the appropriation account using a vertical format of the partnership for the year
ended 30 April 20X2.
The answer to the above example can be found in Chapter 4.
Solution:
Period split
1 May 20X1
31 Jan 20X2
9/12
1 Feb 20X2
30 April 20X2
3/12
Total
12/12
KAPLAN P UBLI S H I N G
19
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Tom was to receive an annual salary of 2,400 and Harry and annual salary of 1,200.
The residual profit or loss is to be split between Tom, Dick and Harry in the following
proportion: 40:40: 20.
At 1 April 20X3, the credit balance on the capital account of each partner was as follows:
Tom 50,000, Dick 30,000 and Harry 20,000.
Harry retired from the partnership on 30 September 20X3. From that date, Tom and Dick
agreed the share profits and losses on the following basis:
Interest on capital accounts was to remain at the rate of 5% per annum. Following
retirement of Harry, the capital account balance of the remaining partners was as
follows: Tom had a credit balance of 60,000 and Dick had a credit account balance
of 36,000.
The net profit for the year ended 31 March 20X4 was 60,000.
Task:
Prepare the appropriation account using a vertical format of the partnership for the year
ended 31 March 20X4.
The answer to the above example can be found in Chapter 4.
Solution:
Period split
1 April 20X3
30 Sept 20X3
6/12
1 Oct 20X3
31 Mar 20X4
6/12
Total
12/12
20
K A P LA N P UB L I S H I N G
P AR TNER SH IP S : C HA P T ER 2
Goodwill:
Dr: Goodwill
KAPLAN P UBLI S H I N G
21
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Cr: Goodwill
In effect, goodwill has been introduced and then immediately eliminated from the
partnership accounts; the consequence is that there is an adjustment to the capital account
balances of those partners who remain in the business.
10
Goodwill
Credit:
Red
Amber
Debit:
Bank account
Credit:
Step 2
Step 3
Debit:
22
Amber
Green
K A P LA N P UB L I S H I N G
P AR TNER SH IP S : C HA P T ER 2
Credit:
Goodwill
Detail
Goodwill account
Detail
Old partnership:
Red
Amber
New partnership:
Red
Amber
Green
Capital accounts
Detail
Red
Amber
Green
Red
Amber
Green
Balance b/d
Bank
Goodwill
Goodwill
Balance c/d
11
Detail
Retirement of a partner
KAPLAN P UBLI S H I N G
23
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Retirement of a partner:
Term used when a partner leaves the partnership for any reason.
Retiring partner is paid off in cash and/or assets for combined capital and
current account balance.
Combine the retiring partners capital and current accounts into one capital
account balance.
Dr: Goodwill
24
Balance due to retiring partner paid off by cash and/or loan to the
partnership
K A P LA N P UB L I S H I N G
P AR TNER SH IP S : C HA P T ER 2
12
Cr: Goodwill
80,000
60,000
40,000
Kent
Essex
Devon
Current
3,600
2,100
4,400
On retirement Kent has agreed to be paid 50,000 of what is owed to him in cash and to
leave the remainder as a loan to the partnership. After Kents retirement Essex and Devon
are to share profits and losses in the ratio of 3:2.
Task:
Show the accounting entries required to account for retirement of a Kent as a partner.
You should also prepare a goodwill account and the partners capital and current
accounts to reflect the retirement of Kent as a partner.
The answer to the above example can be found in Chapter 4.
Solution:
Step 1
Debit:
Credit:
Debit:
Goodwill
Credit:
Step 2
Kent
Essex
Devon
KAPLAN P UBLI S H I N G
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AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Step 3
Debit:
Credit:
Step 4
Debit:
Credit:
Devon
Goodwill
Goodwill account
Detail
Old partnership:
Kent
Essex
Devon
Detail
New partnership:
Essex
Devon
Capital accounts
Detail
Kent
Essex
Devon
Goodwill
Cash
Loan
Balance c/d
Detail
Kent
Essex
Devon
Balance b/d
Goodwill
Current a/c
Kent
Essex
Balance b/d
Current accounts
Detail
Kent
Essex
Devon
Capital ac/c
Balance c/d
Detail
Devon
Balance b/d
Balance b/d
Note that the current accounts for Essex and Devon are not affected by the admission or
retirement of a partner.
26
K A P LA N P UB L I S H I N G
P AR TNER SH IP S : C HA P T ER 2
13
Accounts of a partnership
Accounts of a partnership:
14
Appropriation account
Net profit
40,000
40,500
26,300
50,000
20,000
25,000
10,000
Closing inventory
23,500
Prepayments
2,200
Accruals
5,400
Bank
6,250
Cash
750
Loan
15,000
1,000
2,500
Drawings Ben
25,000
Drawings Gerry
15,000
45,000
25,000
KAPLAN P UBLI S H I N G
27
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Task:
(a)
Prepare the partnership appropriation account for the year ending 30 September
20X4.
(b)
(c)
Net profit
Salary Gerry
Interest on capital:
Ben
Gerry
(b)
Current accounts
Detail
Ben
Gerry
Ben
Gerry
Balance b/d
Drawings
Balance c/d
Balance b/d
28
Balance b/d
Salary
Int on capital
Profit share
Balance c/d
Balance b/d
K A P LA N P UB L I S H I N G
P AR TNER SH IP S : C HA P T ER 2
(c)
Accumulated
depreciation
Carrying
amount
Non-current assets:
Motor vehicles
Fixtures and fittings
Current assets:
Inventory
Trade receivables
Prepayments
Cash at bank
Cash in hand
Net assets
KAPLAN P UBLI S H I N G
Ben
Gerry
29
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
15
Summary
Partnership
Two or more persons carrying on
business with a view to making a
profit and sharing that profit (or loss)
on an agreed basis.
Appropriation account
The allocation of net profit for the
year between the partners which
may include salary, interest on
capital, interest on drawings and
allocation of the residual profit or
loss.
30
K A P LA N P UB L I S H I N G
P AR TNER SH IP S : C HA P T ER 2
16
If you are attending a revision course, please do not attempt the revision kit questions
until your tutor instructs you to do so.
KAPLAN P UBLI S H I N G
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AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
32
K A P LA N P UB L I S H I N G
Incomplete records
Learning objectives:
At the end of this chapter you will be able to:
prepare sales and purchase ledger control accounts, using these to correctly calculate sales,
purchases and bank figures
Contents:
1
10
11
Summary
12
KAPLAN P UBLI S H I N G
33
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
34
K A P LA N P UB L I S H I N G
13,300
6,200
10,400
500
2,100
150
10,200
1,800
750
12,500
3,500
SLCA
PLCA
Motor vehicle at carrying amount
Accruals
Bank account balance overdrawn
Cash in till
Fixtures and fittings at carrying amount
Computer at carrying amount
Prepayments
Inventory
Bank loan
June can also tell you that she withdrew 15,200 of cash for her own use during the year
and that she did not introduce any new capital into the business.
Task:
How much profit did June make for the year ended 31 May 20X4?
The answer to the above example can be found in Chapter 4.
Solution:
Assets:
Fixtures and fittings
Motor vehicle at carrying amount
Computer at carrying amount
Inventory
Receivables
Prepayments
Cash in till
Liabilities
Bank overdraft
Payables
Accruals
Bank loan
KAPLAN P UBLI S H I N G
35
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
=
=
==
==
==
e.g. amounts banked may be after deducting a fixed monthly amounts for
proprietors drawings.- the total of these two amounts would be receipts
from customers
63,425
Payments to suppliers
Payments for expenses
Drawings
28,650
5,800
15,450
The owner can also provide you with details of the assets and liabilities at the start and at
the end of the year as follows:
Receivables
Payables
Accruals
Inventory
36
1 October 20X5
10,500
6,200
350
8,200
30 September 20X6
11,200
7,500
675
9,500
K A P LA N P UB L I S H I N G
Tasks:
(a)
(b)
(c)
(d)
Detail
Cash received
Balance c/d
Balance b/d
(b)
PLCA
Detail
Cash payments
Balance c/d
Detail
Balance b/d
Purchases (bal fig)
Balance b/d
(c)
Detail
Sales revenue
Opening inventory
Purchases
Gross profit
KAPLAN P UBLI S H I N G
37
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
(d)
Detail
Gross profit
Less: expenses
Net profit
The adjustments to the expenses are for opening and closing accruals
38
K A P LA N P UB L I S H I N G
Solution:
Product A
Percentage
Product B
Percentage
Product C
Percentage
Product D
Percentage
KAPLAN P UBLI S H I N G
39
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Opening balance
Sales
40
X
X
X
X
X
Opening balance
Purchases
X
Bank receipts
X
Discount allowed
X
Sales returns
X
Bad debts written off
X
Contra with PLCA
Closing balance
X
X
X
X
X
X
X
K A P LA N P UB L I S H I N G
Inventory
SLCA
PLCA
Bank
1 July 20X7
23,850
16,175
10,860
825
30 June 20X8
25,765
18,325
11,325
700 (overdraft)
During the year cash payments were made for purchases of 67,450 and for expenses of
6,300. May tells you that all sales are made at a mark-up on cost of 20%. However she is
not able to tell you how much she took out of the business as drawings.
Task:
What were Mays drawings for the year ended 30 June 20X8?
The answer to the above example can be found in Chapter 4.
Solution:
Drawings =
Cash payments
Balance c/d
Balance b/d
Purchases (bal fig)
Trading account
Detail
Sales revenue
Opening inventory
Purchases
%
120
100
Gross profit
20
KAPLAN P UBLI S H I N G
41
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Balance b/d
Sales revenue
Balance b/d
Cash from sales (SLCA)
Balance c/d
10
Bank account
Inventory
SLCA
Prepaid general expenses
Cash
PLCA
Bank overdraft
42
150,000
30,200
119,800
30,500
18,250
12,250
37,420
48,370
850
805
87,445
40,160
16,400
56,560
K A P LA N P UB L I S H I N G
(ii)
A summary of the business bank account for the year ended 31 October 20X4:
Cash banked
Receipts from customers
305,625
757,850
Opening balance
Payments to suppliers
General expenses
Salaries
Drawings
Closing balance
1,063,475
(iii)
16,400
832,160
9,315
100,250
42,000
63,350
1,063,475
Other information:
All cash is banked at the end of each day, apart from a cash float. During the
year, the cash float decreased from 805 to 750.
67,200
61,390
250
Tasks:
Jane Smith has asked you to calculate some key figures as follows:
(a)
Calculate the total value of the credit sales for the year ended 31 October 20X4.
(b)
Calculate the total sales for the year ended 31 October 20X4.
(c)
Calculate the total value of the purchases for the year ended 31 October 20X4.
(d)
(e)
Calculate the net profit made for the year ended 31 October 20X4.
(f)
Show the carrying amount of the non-current assets held on 31 October 20X4.
KAPLAN P UBLI S H I N G
43
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Solution:
(a)
SLCA
Bal b/d
Credit sales (bal fig)
Cash receipts
Balance c/d
(b)
Cash
Balance b/d
Cash sales (bal fig)
Total sales
Credit
Cash
Cash banked
Balance c/d
(c)
PLCA
Cash payments
Balance c/d
44
Balance b/d
Purchases (bal fig)
K A P LA N P UB L I S H I N G
(d)
Sales revenue
Less: cost of goods sold
Opening inventory
Purchases (part c)
%
100
75
Gross profit
25
(e)
Net profit
(f)
Premises
Total
Fixtures and
fittings
Cost
Accumulated depreciation
Carrying amount
KAPLAN P UBLI S H I N G
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AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
11
Summary
Incomplete records
This term is used when there is
incomplete information available to
prepare accounting information.
There are several approaches that
may be adopted to create or identify
the missing information.
46
K A P LA N P UB L I S H I N G
12
Q1 A Catering Business
Q9 Chiron
Q10 Parker
If you are attending a revision course, please do not attempt the revision kit questions
until your tutor instructs you to do so.
KAPLAN P UBLI S H I N G
47
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
48
K A P LA N P UB L I S H I N G
Answers to examples
Chapter 1
Example 1 Sole trader accounts preparation
Hardy trading as Design Gecko
Statement of profit or loss for the year ended 31 December 20X9
Sales revenue
Opening inventory
Purchases
Closing inventory
23,340
266,800
(25,680)
(264,460)
100,740
Gross profit
Sundry income:
Discounts received
Expenses:
Wages
Printing and stationery
Motor expenses
Computer consumables
Irrecoverable debts
Discounts allowed
Total expenses
Net profit for the year
KAPLAN P UBLI S H I N G
365,200
1,622
102,362
46,160
13,000
3,720
760
120
864
(64,624)
37,738
49
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Non-current assets:
Land
Fixtures & fittings
Motor vehicles
Current assets:
Inventory
Sales ledger control account
Less: allowance for doubtful debts
Prepayments
Bank
170,000
28,000
24,000
222,000
16,800
12,240
29,040
Carrying
value
170,000
11,200
11,760
192,960
25,680
17,330
(588)
16,742
4,560
46,982
Accumulated
Depreciation
23,004
50
(23,004)
23,978
216,938
200,000
37,738
(20,800)
216,938
K A P LA N P UB L I S H I N G
Chapter 2
Example 1
(a)
Net profit for
the year
Profit for the year
Salary to Sally
Interest on capital:
Sam (10% 32,000)
Sally (10% 48,000)
Residual profit
Sam (2/3)
Sally (1/3)
To current accounts
54,000
(10,000)
(3,200)
(4,800)
36,000
(24,000)
(12,000)
Nil
Partners
Sam
Sally
10,000
3,200
4,800
24,000
12,000
26,800
27,200
(b)
Net profit for
the year
Profit for the year
Salary to Sally
Interest on capital:
Sam (10% 32,000)
Sally (10% 48,000)
Residual profit (loss)
Sam (2/3)
Sally (1/3)
To current accounts
14,400
(10,000)
(3,200)
(4,800)
(3,600)
(2,400)
(1,200)
Nil
Partners
Sam
Sally
10,000
3,200
4,800
(2,400)
800
(1,200)
13,600
Note that the appropriation of salary and interest on capital take place as normal, with the
resulting residual profit or loss then allocated accordingly.
KAPLAN P UBLI S H I N G
51
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Example 2
Net profit for
the year
22,000
(8,000)
(12,000)
(2,800)
(1,200)
600
400
(1,000)
600
400
Nil
Residual loss
Paula (3/5)
Jane (2/5)
To current accounts
Partners
Paula
Jane
8,000
12,000
2,800
1,200
(600)
(400)
(600)
9,600
(400)
12,400
Note the effect of interest on drawings upon the appropriation account. They represent a charge
against each partner, with the effect that the profit available for allocation between the partners
has been increased.
Current accounts of the partners:
Current accounts
Detail
Drawings
Int on drawings
Share of loss
Bal c/d
52
Paula
12,000
600
600
6,100
19,300
Jane
8,000
400
400
11,900
20,700
Detail
Balance b/d
Salary
Int on capital
Paula
8,500
8,000
2,800
Jane
7,500
12,000
1,200
19,300
20,700
K A P LA N P UB L I S H I N G
Example 3
Period split
Profit for the year
Salary:
Cagney
Lacey
Starsky
Interest on capital:
Cagney
Lacey
Starsky
Profit available for appropriation
Cagney
Lacey
Starsky
1 May 20X1
31 Jan 20X2
9/12
37,500
1 Feb 20X2
30 April 20X2
3/12
12,500
12/12
50,000
(1,875)
(1,125)
(625)
(375)
(1,000)
(2,500)
(1,500)
(1,000)
(1,500)
(1,050)
(500)
(350)
(250)
9,400
(3,760)
(3,760)
(1,880)
Nil
(2,000)
(1,400)
(250)
41,350
(19,735)
(19,735)
(1,880)
Nil
1 April 20X3
30 Sept 20X3
6/12
30,000
1 Oct 20X3
31 Mar 20X4
6/12
30,000
Total
12/12
60,000
(1,200)
(600)
(1,500)
(900)
(2,700)
(900)
(600)
(1,250)
(750)
(500)
25,700
(10,280)
(10,280)
(5,140)
Nil
(1,500)
(900)
25,200
(15,120)
(10,080)
Nil
(2,750)
(1,650)
(500)
50,900
(25,400)
(20,360)
(5,140)
Nil
31,950
(15,975)
(15,975)
Nil
Total
Example 4
Period split
Profit for the year
Salary:
Tom
Dick
Harry
Interest on capital:
Tom
Dick
Harry
Profit available for appropriation
Tom
Dick
Harry
KAPLAN P UBLI S H I N G
53
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Example 5
Step 1
Debit:
Goodwill
120,000
Credit:
60,000
Amber
60,000
Debit:
Bank account
70,000
Credit:
70,000
Step 2
Step 3
Debit:
Credit:
48,000
Amber
48,000
Green
24,000
Goodwill
120,000
Goodwill account
Detail
Detail
Old partnership:
New partnership:
Red
60,000
Red
48,000
Amber
60,000
Amber
48,000
Green
24,000
54
120,000
120,000
K A P LA N P UB L I S H I N G
Capital accounts
Detail
Red
Amber
Green
Detail
Balance b/d
Goodwill new
partners
48,000
48,000
112,000
92,000
Amber
Green
100,000
80,000
24,000 Cash
introduced
Goodwill old
partners
Bal c/d
Red
70,000
60,000
60,000
46,000
160,000
140,000
70,000
160,000
140,000
70,000
Example 6
Step 1
Debit:
3,600
Credit:
3,600
Step 2
Debit:
Goodwill
Credit:
60,000
Kent
30,000
Essex
20,000
Devon
10,000
Step 3
Debit:
113,600
Credit:
50,000
63,600
Step 4
Debit:
Credit:
36,000
Devon
24,000
Goodwill
60,000
KAPLAN P UBLI S H I N G
55
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Goodwill account
Detail
Detail
Old partnership:
New partnership:
Kent
30,000
Essex
36,000
Essex
20,000
Devon
24,000
Devon
10,000
60,000
60,000
Capital accounts
Kent
Goodwill
Cash
Loan
Balance c/d
Essex Devon
36,000 24,000
50,000
63,600
113,600
44,000
80,000
Kent
Essex
60,000
20,000
Devon
40,000
10,000
113,600
80,000
44,000
50,000
26,000
Kent
3,600
Essex
2,100
Devon
4,400
3,600
2,100
2,100
4,400
4,400
26,000
50,000
Balance b/d
Current accounts
Capital account
Balance c/d
Kent
3,600
3,600
Essex
Devon
Balance b/d
2,100 4,400
2,100 4,400
Balance b/d
56
K A P LA N P UB L I S H I N G
Example 7
(a)
Net profit
Salary
Interest on capital
Ben (45,000 3%)
Gerry (25,000 3%)
40,000
(4,000)
1,350
750
(2,100)
33,900
Profit share:
Ben (33,900 2/3)
Gerry (33,900 1/3)
22,600
11,300
(33,900)
(b)
Current accounts
Balance b/d
Drawings
Balance c/d
Ben
Gerry
1,000
25,000 15,000
3,550
Balance b/d
26,000 18,550
2,050
KAPLAN P UBLI S H I N G
Ben
Balance b/d
Salary
Interest on capital
Profit share
Balance c/d
Balance b/d
1,350
22,600
2,050
26,000
Gerry
2,500
4,000
750
11,300
18,550
3,550
57
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
(c)
Non-current assets:
Motor vehicles
Fixtures and fittings
50,000
25,000
75,000
Current assets:
Inventory
Receivables
Prepayments
Cash at bank
Cash in hand
Current liabilities:
Payables
Accruals
Accumulated
depreciation
Carrying
value
20,000
10,000
30,000
30,000
15,000
45,000
23,500
40,500
2,200
6,250
750
73,200
(26,300)
(5,400)
(31,700)
Non-current liability:
Loan
(15,000)
71,500
Capital accounts
Ben
Gerry
Current accounts
Ben
Gerry
41,500
86,500
45,000
25,000
70,000
(2,050)
3,550
1,500
71,500
58
K A P LA N P UB L I S H I N G
Chapter 3
Example 1
Assets:
Fixtures and fittings
Motor vehicle at carrying amount
Computer at carrying amount
Inventory
Receivables
Prepayments
Cash in till
Liabilities:
Bank overdraft
Payables
Accruals
Bank loan
2,100
6,200
500
3,500
=
=
==
==
==
10,200
10,400
1,800
12,500
13,300
750
150
49,100
(12,300)
36,800
Example 2
(a)
SLCA
Detail
Balance b/d
Sales revenue (bal fig)
Balance b/d
KAPLAN P UBLI S H I N G
10,500
64,125
74,625
11,200
Detail
Cash received
Balance c/d
63,425
11,200
74,625
59
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
(b)
PLCA
Detail
Cash payments
Balance c/d
28,650
7,500
74,625
Detail
Balance b/d
Purchases (bal fig)
Balance b/d
6,200
29,950
36,150
7,500
(c)
Detail
Sales revenue
Opening inventory
Purchases
64,125
8,200
29,950
38,150
(9,500)
(28,650)
35,475
(d)
Detail
Gross profit
Less: expenses (5,800 350 + 675)
Net profit
35,475
(6,125)
29,350
The adjustments to the expenses are for opening and closing accruals.
60
K A P LA N P UB L I S H I N G
Example 3
Product A
Cost
Mark-up
Selling price
Product B
Cost
Mark-up
Selling price
Product C
Percentage
100
50
30
15
50 30%
130
65
50 130%
Percentage
100
90
40
36
90 40%
140
126
90 140%
Percentage
Cost
75
60
80 75%
Mark-up
25
20
80 25%
100
80
Selling price
Product D
Percentage
Cost
80
60
75 80%
Mark-up
20
15
75 20%
100
75
Selling price
Example 4
Drawings = 4,825
Purchase ledger control account
Cash payments
Balance c/d
KAPLAN P UBLI S H I N G
67,450
11,325
78,775
Balance b/d
Purchases (bal fig)
10,860
67,915
78,775
61
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
Trading account
Detail
Sales revenue
Opening inventory
Purchases
79,200
%
120
(66,000)
13,200
100
23,850
67,915
91,765
(25,765)
20
16,175
79,200
95,375
77,050
18,325
95,375
Bank account
Balance b/d
Cash from sales (SLCA)
Balance c/d
825
77,050
700
78,575
67,450
6,300
4,825
78,575
Example 5
(a)
SLCA
Opening balance
Credit sales (bal fig)
62
819,240
757,850
61,390
819,240
K A P LA N P UB L I S H I N G
(b)
Cash
Opening balance
Cash sales (bal fig)
306,375
Total sales
Credit
Cash
305,625
750
306,375
770,870
305,570
1,076,440
(c)
PLCA
Cash payments
Closing balance
899,360
40,160
859,200
899,360
(d)
KAPLAN P UBLI S H I N G
1,076,440
%
100
807,330
269,110
75
37,420
859,200
896,620
(89,290)
25
63
AAT FOCUS NOTES (STUDENT): PREPARE FINAL ACCOUNTS FOR SOLE TRADERS AND PARTNERSHIPS (FSTP)
(e)
269,110
10,415
100,250
3,000
7,625
121,290
147,820
Net profit
(f)
Premises
Cost
Accumulated depreciation
(30,200 + 3,000)
(18,250 + 7,625)
Carrying amount
64
150,000
Fixtures and
fittings
30,500
Total
180,500
25,875
4,625
59,075
121,425
33,200
116,800
K A P LA N P UB L I S H I N G