A and B share profits and losses in the ratio of 70% and 30% respectively. The trial balance as at 31 December 2016 was as follows:

Dr Cr

K K

Office equipment at cost 9,200

Motor vehicles at cost 21,400

Provision for depreciation:

- Motor vehicles 12,800

- Office equipment 3,600

Inventory 38,410

Receivables and payables 41,940 32,216

Cash in bank 2,118

Cash in hand 317

Sales 180,400

Purchases 136,680

Salaries 27,400

Office expenses 2,130

Discounts allowed 312

Current accounts:

A 7,382

B 7,009

Capital accounts: A 50,000

B 20,000

Drawings A 17,500

B 16,000

313,407,313,407

The following notes are relevant at 31 December, 2016

1. Inventory at 31 December 2016 K41,312
2. Office expenses owing K240
3. Provide for depreciation : motor vehicles 25% on cost, office expenses 20% on cost
4. Charge interest on capital at 5% per annum
5. Interest on Drawings: A K300; B K200;

Q.1

Required:

1. Discuss the importance of the Partnership Act 1890
2. Using the information in the case study above, prepare the income statement for A and B for the year ending 31 December 2016.
3. Using your answer in (a) above prepare the Profit and Loss Appropriation Account for the partners.
4. Using your answer in (c) above prepare the partners current accounts in columnar format.