PARTNERSHIP ACCOUNTS QUESTIONS

DISSOLUTION OF PARTNERSHIP FIRMS

QUESTION ONE

A B & C in partnership sharing Profit and loss in the ratio 2:2:1 respectively. The Balance sheet on 31 st December
2005 was as follows.

Furniture 390,000 Capital A 450,000

B 450,000
Stock 660,000 C 300,000
Debtors 540,000 C’s loan 150,000
Bills receivable 120,000 Creditors 450,000
Cash at bank 90,000
1,800,000 1,800,000

The partners decided to dissolve the partnership on 1 st of January 2009 and the assets were sold on piece meal basis
as follows:

Details Stock Debtors Furniture Bills receivable Realization exp.

31/01/09 150,000 120,000 150,000 - 9,000
28/02/09 160,000 150,000 - 120,000 150,000
31/03/09 240,000 180,000 180,000 - 5,000
30/04/09 60,0000 75,000 30,000 - 9,000

Required
a) Statement of distribution
b) Realization account
c) Partners capital account
d) Bank account

QUESTION TWO

ABC and D are in partnership sharing profits in the ratio 3:2:1:4. It is decided to dissolve the firm on 1 st Jan 2005 on
which date the B/sheet is as follows:-

BALANCE SHEET
Assets
Land & building 8500 Capital A 7000
Plant & machinery 7921 B 4000
Goodwill 3000 C 3000
Investments 2000 D 4000
Stock 6348 Leasehold redemption fund 2000
Debtors 3841 General Reserve 5000
Cash at bank 313 Creditors 6923
31923 31923

The assets were realized on piecemeal basis as under:-

Jan 10 Stock (part) 3500

Jan 14 Debtors (part) 2932
Jan 28 Investments 2420

1
 Feb 3rd Goodwill 2000
Feb 21st 1and & biding 7000
Feb 21st Debtors (part) 500
Feb 21st Stock (Bal) 2750
March 15th M/V 6560
15th Debtors (Bal) 315

Subject to providing sh. 500,000 to meet possible expenses of realization, the partners decided that after creditors
have been paid all cash received shall be divided amongst them immediately. Realization expenses paid on 15 th
March amounted to Sh. 400,000.
Required
(a) Distribution statement
(b) Realization a/c
(c) Partners capital a/c
(d) Bank a/c

AMALGAMATION OF PARTNERSHIP FIRMS

QUESTION THREE

The following are the balance sheets

A&B – balance sheet

Investments 30,000 Capital A 48,000
O. Furniture 10,000 B 32,000
Debtors 40,000 Creditors 50,000
Stock 36,600
Cash 13,400
130,000 130,000

C& D – balance Sheet

Premises 80,000 Capital C 80,000
O. Furniture 8,000 D 40,000
Debtors 30,000 Z’s loan 10,000
Stock 40,800 creditors 40,000
Cash 11,200
170,000 170,000

The 2 partnership firms agreed to amalgamate on 1st January. 2012 under the following terms
1. Z’s loan to be paid – bank
2. Investments of A & B will not be taken over by new firm
3. Good will of A & B valued @ Sh. 20,000
4. Goodwill C & D valued @ sh. 16,000
5. Premises were revalued @ sh. 100,000
6. Stocks of A & B was undervalued by sh. 4,000
7. Stocks of C & D was overvalued by sh. 8,000
8. Provision for doubtful debt of 5% be created by both firms
9. Total capital of the new firm to be sh. 160,000 and should be the proportion of the P & L sharing ratio of
3:2:3:2 for A, B, C, D respectively.
10. Goodwill of the new firm to be written off

Required
Prepare relevant a/c to close books of the old firms and also the opening B/sheet of the new firm.

2
QUESTION FOUR

A, B & C were in partnership sharing P & L in the ratio 2:2:1 respectively they agreed to amalgamate with D a sole
trader. As at that date the balance sheet were as follows.

Details AB&C D Details A&B&C D

Premises 6,000 - Capital A 8,000
P &M 3,600 2,400 B 6,000
Stock 6,000 25,000 C 4,000
Debtors 7,000 3,600 D 3,000
Bank 4,400 Creditor 9,000 2,000
Bank - 3,500
overdraft
27,000 8,500 27,000 8,500

Additional Information
1. Partner A was to retire on 31st Dec. 06 and bal. due to him being left with new firm as a loan.
2. Profit to be shared in the ratio 2:1:1 for B, C and D respectively.
3. Value of goodwill was agreed at sh. 10,000 for A, B, & C at Sh. 4,000 for D
4. The new firm was to take over asset and liabilities and some assets revalued as follows.

Details AB & C D
Premises 8,000 -
P&M 3,200 2,900
Debtors 6,800 3,160

5. The capital of the new firm was to be sh. 10,000 and was to be divided to the partners with P & L
sharing ratio. Any surplus or deficit was to transferred to the current.
6. No goodwill is to be maintained in the books of the new firm.
Required
a) Ledger a/c to close the books of the old firms
b) Ledger a/c in the books of new firm
c) Balance sheet of the new firm after amalgamation.

CONVERSION OF A PARTNERSHIP INTO A COMPANY

QUESTION FIVE

A and B are in partnership sharing profits in the ratio 3:2. Their b/sheet as at 31st Dec. 2002 is as follows:-
B/Sheet
Assets ‘000’ ‘000’
Premises 3,000 Capital A 2,000
F&F 100 B 250
Debtors 2,000 Current A 300
Cash 60 B 50
M/V 300 Loan from A 1600
Creditors 1260
5,460 5,460

1) Additional Information:
2) Achievers Ltd is incorporated for the purpose of taking over the
3) Partnership. It is to acquire premises at Sh. 4m and other assets with exception of cash and M/V at book
value.
4) The current liabilities also be taken over by the new co. The purchase consideration of Sh 6m is to be
settled by 30 000 ord. shares of sh. 100 each and cash of sh. 3m paid through bank o verdraft B took over the
M/V at a valuation of sh. 250 000 and the partners have agreed to divided their shares in their P&L ratio.
5) A’s loan was not taken over by the company.

Required
3
 Prepare the final accounts after the partnership conversion into a company

QUESTION SIX
Onyango & Kimani are partners sharing P & L ratio 2:3 respectively. Their B/sheet at 31st Dec. 09 was as follows

‘000 ‘000
M/V 480 Capital 0 2250
Furniture 375 K 1500
Stock 1710 Creditors 960
Debtors 1035 Accrued electricity 30
Investment 555
Bank 585
4740 4740

Additional infomation
1) Kitui Ltd took over the partnership from 1st Jan. 2010 on the following terms
2) All assets except cash at bank and all liabilities except accrued electricity will be taken over by co.
3) Asset taken over by co. were revalued as follows

Details ‘000
M/V 450
Furniture 150
Stock 1350
Debtors 900
Investment 810

3) The purchase consideration was agreed at Sh. 3450,000 to be settled by 20,000 o/shares @ Sh. 20 each at a
premium of 20% fully paid and the balance in cash.
4) The co also invited members of the co. to subscribe fro 75,000 ordinary shares of sh. 20 each @ premium of
25%. The issue was fully subscribed and paid for.
5) The shares issued to the partners were distributed to the partners with P & L ratio
Required
a) Necessary entries in the books of the partnership
b) Opening B/sheet of Kitui Ltd.