Assad Hamed and Mahmood are partners in Stay Healthy (General Partnership) sharing profits and losses in the proportion 3: 3: 4

They are entitled to draw annually OMR 3000; OMR 2500 and OMR 2000

respectively out of their anticipated share of profit. Any drawings more than these amounts are to be regarded as advances taken from the firm and are to be subject to interest @ 18% p.a. The capitals in the beginning of the year is to be allowed interest @ 15% p.a. Capitals of the partners in the beginning of the year were: Assad OMR 22,000; Hamed OMR 32,000 and Mahmood OMR 36,000. The credit balances of their Current Accounts were Assad OMR 11,520; Hamed OMR 18,640 and Mahmood OMR 5,760. Their drawings during the year were: Assad Omar 3200; Hamed 3000 and Mahmood 1800. The profit for the year was OMR 62000 before making any adjustments for interest as above.

Required:

1. Draw up Profit and Loss Appropriation Account, Capital and Current Accounts of the partners for the year ended 31 December 2016

2. Mahmood is actively managing the affairs of the firm. He is now expecting to be paid a salary of OMR 1200 per month. Determine the impact of paying salary to Mahmood on the profits available for distribution.

3. Consider the position where the other partners do not want to pay any salary to Mahmood. Discuss this with guidance from the Commercial Companies law of Oman.