Additional information i Inventory as at 31 March 2015 was valued at 273400

Additional information i inventory as at 31 march

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Additional information: (i) Inventory as at 31 March 2015 was valued at $273,400. (ii)Office expenses owed as at 31 March 2015 amounted to $1,100. (iii) Depreciation for the year was to be charged as follows: Office equipment: 10% on cost Motor vehicles: 20% on net book value (iv) An interest rate of 10% per annum was to be allowed on capital. (v)Interest was to be charged on drawings: Ho $1,800, Fong $2,100. (vi) Fong was entitled to a salary of $20,000 per annum. (vii) An interest rate of 5% per annum was to be charged on the loan from Ho. Exhibit 10.2
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Exhibit 10.2 When the term ‘profit and loss and appropriation account’ is used in questions, you are expected to show the income statement with the appropriations shown. If the question just mentions the ‘appropriate account, you are expected to show only this part
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Preparation of financial statements for a partnership Notes: 1 Staff salaries are separated from partners’ salaries. Staff salaries should be charged as an expense before the net profit is determined, while partners’ salaries should be treated as appropriation items after the net profit has been ascertained. 2 Interest on partners’ loans should be charged as an expense and directly credited to partners’ capital accounts or current accounts. This seldom involves direct payments to partners. Exhibit 10.2
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Exhibit 10.2 Loans from partners should be shown as a liability in the statement of financial position. If the loan is repayable within one year, it should be shown as a current liability. If it is repayable after one year, it should be shown as a non-current liability. Loans from partners should be shown as a liability in the statement of financial position. If the loan is repayable within one year, it should be shown as a current liability. If it is repayable after one year, it should be shown as a non-current liability.
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Preparation of financial statements for a partnership Exhibit 10.2
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Points to note when preparing financial statements for a partnership Capital vs. current accounts Learning Tips 1. Capital contributed and any gain/loss from revaluation are recorded in the capital accounts. 2. Drawings and appropriation items such as interest on capital and interest on drawings are recorded in the current accounts. Salaries to partners Staff salaries and partners’ salaries should be separately recorded in the partnership books. 1. Staff salaries are treated as an operating expense of the partnership. 2. Partners’ salaries are treated as appropriation items after net profit has been determined.
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Points to note when preparing financial statements for a partnership Loans from partners Learning Tips A partner may sometimes make a loan to the partnership. When this happens: 1. The partner becomes a creditor of the partnership. 2. The liability is shown separately in the statement of financial position. Whether it is classified as a current or non-current liability depends on when the loan has to be repaid.
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  • Spring '07
  • Smith
  • partner, current account

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