Reid and Benson are in partnership as lecturers and tutors. Interest is to be allowed on capital and on the opening balances on the current accounts at a rate of 5% per annum and Reid is to be given a salary of £18,000 per annum. Interest is to be charged on drawings at 5% per annum and the profits and losses are to be shared Reid 60% and Benson 40%.

The following trial balance was extracted from the books of the partnership at 31 December 2018:

• An allowance for doubtful debts is to be created of £1,500.
• Insurances paid in advance at 31 December 2017 were General £50; Professional Indemnity £100.
• Fixtures and fittings are to be depreciated at 10% on cost.
• Interest on drawings: Benson £550, Reid £1,050.
• Inventory of books at 31 December 2018 was £1,500.

Required:
Prepare a statement of profit or loss together with an appropriation account at 31 December 2018 together with a statement of financial position as at that date.

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Capital account - Benson Capital account - Reid Current account - Benson Current account - Reid Drawings - Reid 50,000 75,000 4,000 5,000 17,000 Drawings - Benson 20,000 Sales- goods and services 541,750 Purchases of textbooks for distribution 291,830 Returns inwards and outwards 800 330 Carriage inwards 3,150 Staff salaries 141,150 Rent 2,500 Insurance - general 1,000 Insurance - public indemnity 1,500 Compensation paid due to Benson error 10,000 General expenses 9,500 Bad debts written-off 1,150 Fixtures and fittings - cost 74,000 Fixtures and fittings - depreciation 12,000 Accounts receivable and accounts payable 137,500 23,400 Cash 400 Total 711,480 711,480