Principles of Accounts for CSEC®

2nd edition

Chapter 8: Accounting for partnerships

1. B (1 mark)
2. A (1 mark)
3. D (1 mark)
4. A (1 mark)
5. (a)
Any two of the following advantages a partnership has over a sole-trader business:
1. Ease of raising capital: while a sole trader will have to depend on his own resources,
taking on an additional partner will bring more capital into the business.
2. Specialist skills: a sole trader will have to absorb all the management roles in the
business, whereas each partner might have different specialist skills they can
combine for the benefit of the business.
3. Shared workload: with more than one partner, the workload is shared whereas a sole
trader might be overwhelmed from doing all the work him- or herself.
4. Share of risks/losses: the burden of losses falls solely on the sole trader but is shared
by partners.
5. Continuity of business: when a sole trader dies, so does his business. In a partnership,
however, an agreement can be put in place for the continuity of the business.

Mark Scheme

•• For any two answers as stated above: 1 mark each

(2 marks)

(b)
Kavindra and Devesh
Appropriation account for the year ended 31 December 2018
$ $
Net profit 150 000
Add interest on drawings: Kavindra (4 000 × 8% ÷ 2) 160
Devesh (2 500 × 8% ÷ 4) 50 210
150 210
Less interest on capital: Kavindra (100 000 × 4%) 4 000
Devesh (80 000 × 4%) 3 200 (7 200)
143 010
Less salary: Devesh (30 000)
113 010
Share of profits:
Kavindra (3∕5) 67 806
Devesh (2∕5) 45 204 113 010
1 Principles of Accounts for CSEC® 2nd edition © Oxford University Press 2019
Chapter 8: Accounting for partnerships

Mark Scheme

•• Correct format: 1 mark

•• Calculation of interest on drawings: 4 marks
•• Calculation of interest on capital: 2 marks
•• Deduct salary for Devesh: 1 mark
•• Share of profits according to ratio: 2 marks
(10 marks)

(c)
Kavindra and Devesh
Current account
$ $ $ $
Kavindra Devesh Kavindra Devesh
Dec 31 Bal b/d 11 200 9 600 Dec 31 Int. on capital 4 000 3 200
Drawings 4 000 2 500 Salary 30 000
Int. on drawings 160 50 Share of profits 67 806 45 204
Dec 31 Bal c/d 56 446 66 254
71 806 78 404 71 806 78 404
Jan 01 Bal b/d 56 446 66 254

Mark Scheme

•• Correct placement of drawings, interest on drawings, interest on capital, salary

and share of profits: 1 mark each
•• Columnar format: 1 mark
•• Credit b/d balance: 1 mark
(7 marks)

(d) The credit b/d balance on the partners’ current account means that this sum is owed to
the partners by the business, essentially making the partners creditors to the business.

Mark Scheme

•• Stating that the balance is owed to the partners: 1 mark

(1 mark)

2 Principles of Accounts for CSEC® 2nd edition © Oxford University Press 2019