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LECTURE 1
PARTNERSHIP ACCOUNTS
1
...
1 The provision of the Partnership Act
1
...
1 Formation/ membership limits
1
...
2 Rights of partners
1
...
3 Obligations of partners
1
...
4 Dissolutions of partnerships Business/ Firm
1
...
5 Privileges of partners
1
...
2
...
2
...
2
...
3 Dissolution of partnerships
1
...
1 Piece-meal Dissolutions of partnerships
1
...
2 All Partners liquid, no loss
1
...
3 All Partners liquid, loss on realization of Assets
1
...
4 Any one Partner Insolvent
1
...
5 Rule of Garner Vs Murray
1
...
5 Sale of a Partnership to a limited company
1
...
1
INTRODUCTION
1
...
Prepare adjustments in partners’ shareholdings upon
admission of new partners, retirement of partners and
reallocation of partners’ profit and loss sharing ratios
...
Prepare accounts for conversion of a partnership into a limited
company
...
Prepare distribution schedule in event of a piecemeal
distribution
...
3
PROVISIONS OF THE PARTNERSHIP ACT-LAWS OF KENYA
This is a preview of the basic issues in Partnership Act Laws of Kenya
...
For a detailed understanding, please examine the Act itself
...
4
TREATMENT OF GOODWILL IN PARTNERSHIP
1
...
1
Definition and Causes of Goodwill
Goodwill has received various legal definitions e
...
“The benefit arising from old
connections and reputation”
...
“It is the attractive force which brings in customers
...
Goodwill is
composed of variety of elements
...
”
A business builds up some reputation after it has continued for some time
...
This is a very valuable asset which one cannot touch, feel, or
see
...
To the
Accountant, Goodwill may be said to be that element arising from the reputation, connection or
other advantages possessed by a business which enables it to earn greater profit than the return
normally to be expected on the capital employed in the business
...
2
All factors mentioned above contribute to extra and goodwill arises only when the business is
profitable
...
You should remember
that it is the expectation of profits in future that makes goodwill a valuable asset
...
1
...
2
Methods of Valuation of Goodwill
There are three methods which are commonly used for valuation of goodwill
...
For example, it is expressed as three
years purchase for past five years profit
...
Year
1963
1964
1965
1966
1967
Total
(ii)
Profit
8500
...
00
7400
...
00
10000
...
00
Goodwill
Average = Shs 45000/=
= 9000 x 3 = Shs 27000/=
= 9000/=
Super Profits Basis: In this method, interest on capital employed and reasonable salary of
the partners are deducted first from the average profits and then what remains is “Super
Profits” or profits on account of special advantage of the firm
...
Thus actual average profit is Shs
...
The super profit is, therefore, Shs 3000/=
...
e
...
24000/=
...
e
...
Re asonable Re turn
7
...
1
...
3
Necessity of Valuing of Goodwill in Partnership
The question of valuation of goodwill arises in the following circumstances: (a) When profit
sharing proportions are changed; (b) When a new partner is admitted to the partnership; (c)
When a partner retires or dies; and (d) When partnership is dissolved, converted or sold
...
4
...
1 Change in Profit Sharing Proportion
If the partners agree to change the proportion different from the one that which would be
inexistence, the gaining partner must compensate the losing partner unless otherwise agreed by
them
...
For example, if Kintu and Musoke are partners sharing profits as follows: Kintu-3/4 and Musoke-1/4
...
e
...
This means Kintu
is selling to Musoke ¼ share of profits
...
After the change in Ratio, they would each get
Shs 10,000/=
...
If the goodwill
is valued at Shs 40000/= Musoke must pay Kintu one-fourth of Shs 40000/= i
...
Shs 10000/= for
forgoing his ¼ share in the profit
...
4
...
2 Admission of a new partner
When a new partner is admitted, two major problems arise
...
When an existing
partnership firm admits a new partner either for introduction of additional capital, influence
bringing in exceptional skill or extension of business, the new comer is required to pay some
premium to compensate the existing partners to surrender part of the profits which they had been
4
hitherto enjoying in full
...
Goodwill may thus be looked upon as a
compensation paid by new comer in an established business to the existing partners for their past
efforts and the risk of capital undertaken to bring the business in the present stage of reputation
and profit earning capacity and in return for their agreeing to forgo a share of future profits for
his benefit
...
)
(2)
The new partner brings Cash which old partners withdraw
...
Debit: Old Partner’s Capital A/cs
Credit: Cash/Bank
(With cash withdrawn by the old partner
...
The cash is shared by the old partners in the proportion
In which they lose
...
If is called
“Revaluation method”
...
(In their profit sharing proportions)
xx
xx
Note: Full value of goodwill appears in the balance sheet on asset sides
...
All partners
(both old and new) will be debited in the new profit sharing proportions
...
The entries are:
Debit: Goodwill Account
xx
5
Credit: Old partner’s capital A/cs
(In old proportions
...
The first three
methods are very simple and therefore, need no further elaboration by means of practical
illustrations
...
They agree to admit Shivji into partnership as for year starting 1-1-2007
with the following terms in return for 1/3 shares in future profits
...
(b) That as Shivji is unable to bring his share of Goodwill in cash, the goodwill be raised in
books
...
Required:
Capital accounts of the partners and the goodwill account
...
Suggested Solution
JOURNAL ENTRIES
Yr 9
Particulars
Jan 1
Bank Account
Shivji’s Capital A/c
(Being the amount brought in by Shivji as capital)
Goodwill Account
Musoke’s Capital A/c
Kogi’s Capital
Shs
Dr
Shs
20,000
20,000
Dr
(Being the goodwill raised in the firm’s books and
corresponding credit to old partner’s in the old profit
sharing proportions)
15,000
9,000
6,000
New profit sharing Proportions: -
Musoke
3/5 x 2/3 = 6/15
Kogi
2/5 x 2/3 = 4/15
Shivji
1/3
= 5/15
If in the above illustration, the partners decide to wipe – off the Goodwill from their
books, the entry necessary to bring this about will be to debit the Capital Accounts of each of the
partners in their new profit – Sharing proportions and credit the goodwill account
...
6
Dr
Yr 9
Jan 1
Jan 1
PARTNERS’s CAPITAL ACCOUNT
Particulars
Goodwill a/c
Balance c/d
S
5,000
15,000
20,000
Msk
6,000
23,000
29,000
Kogi
4,000
17,000
Yr 9
Jan 1
Jan 1
Particulars
Balance b/d
Goodwill A/c
Bank A/c
21,000
Cr
Shvj
Msk
20,000
9,000
Shs
15000
6000
20,000
20,000
29,000
21,000
15,000
23,000
17000
Jan 1
Balance c/f
Dr
GOODWILL ACCOUNT
Yr 9 Particulars
Shs Yr 9
Jan 1 Musoke’s Capital A/c
9000 Jan 1
Jan 1 Kogi’s Capital A/c
6000 Jan 1
Jan 1
15,000
Cr
Particulars
Musoke’s Capital A/c
Kogi’s Capital A/c
Shivji’s Capital A/c
PARTNERS’s CAPITAL ACCOUNT
Yr 9
Jan 1
Jan 1
Particulars
Goodwill a/c
Balance c/d
S
5,000
15,000
Msk
6,000
23,000
Kogi
4,000
17,000
20,000
29,000
Yr 9
Jan 1
Jan 1
Shs
6000
4000
5000
15,000
Cr
Particulars
Balance b/d
Goodwill A/c
Bank A/c
21,000
Shvj
Msk
20,000
9,000
Shs
15000
6000
20,000
20,000
29,000
21,000
15,000
23,000
17000
Msk
20,000
9,000
Shs
15000
6000
20,000
20,000
29,000
21,000
20,000
23,000
17000
Msk
20,000
9,000
Shs
15000
6000
20,000
20,000
29,000
21,000
15,000
23,000
17000
Jan 1
Balance c/f
PARTNERS’s CURRENT ACCOUNT
Yr 9
Jan 1
Jan 1
Particulars
Goodwill a/c
Balance c/d
S
5,000
20,000
Msk
6,000
23,000
Kogi
4,000
17,000
20,000
29,000
Yr 9
Jan 1
Jan 1
Cr
Particulars
Balance b/d
Goodwill A/c
Bank A/c
21,000
Shvj
Jan 1
Balance c/f
PARTNERS’s CAPITAL ACCOUNT
Yr 9
Jan 1
Jan 1
Particulars
Goodwill a/c
Balance c/d
S
5,000
15,000
Msk
6,000
23,000
Kogi
4,000
17,000
20,000
29,000
Yr 9
Jan 1
Jan 1
Cr
Particulars
Balance b/d
Goodwill A/c
Bank A/c
21,000
Shvj
Jan 1
Balance c/f
Note: From the above, it is clear that Musoke benefits to the extent of Shs
...
If Shivji
had brought in his 1/3 share of goodwill in cash; viz
...
The only difference in this
case is that instead of Bank A/c being debited, it’s Shivji’s Capital Account that gets the debit as
he failed to bring in his proportionate amount of goodwill
...
Revaluation of Assets and Liabilities
When a new partner is admitted it is natural that he should not benefit from any
appreciation in the value of assets nor should he suffer because of any fall in the value of assets
...
The book values are scrutinised carefully by the
old partners and the new partner with a view to see if any readjustments are necessary
...
A profit and Loss Adjustment Account is therefore opened
...
Do note that
that is its name too
...
XX
(b) If the values of assets fail,
Dr Profit and Loss Adjustment Account
Cr the relevant asset account (with the difference only)
XX
XX
(c) Increase in the amount of liabilities is a loss, so the entry is:Dr Profit and Loss Adjustment A/c (with the increase only) XX
Cr the relevant liability A/c
XX
(d) Any reduction in the liabilities is a profit and therefore,
Dr the liability account
Cr the adjustment A/c with the reduction amount
...
Illustration:
Alexander and Robert, sharing profits in proportions of ¾ and ¼ prepare
...
BALANCE SHEET AS AT 31ST DECEMBER, Yr 8
Liabilities
Shs
Assets
Creditors
37500 Cash at Bank
General Reserve
4000 Bills receivable
Capital Accounts:
Debtors
Alexandar
30,000
Stock
Robert
16,000
Office Furniture
46000 Land and Buildings
87500
Shs
22500
3000
16000
21000
1000
25000
87500
They admit John into partnership on 1st January Yr 9 on the following terms:
i
...
ii
...
20000/=
...
That Stock and Fixtures be reduced by 10% and a 5% Reserve for Doubtful Debts is created
on debtors
...
iv
...
Required:
Set out the journal entries, the Profit and Loss Adjustment Account
...
Yr 8
Dec
...
31
Dec
...
Land and Buildings A/c
Dr
Profit and Loss A/c
Adjustment A/c
...
31
Dec
...
31
Dec
...
31
Dec
...
A/c
Bank A/c
30,000
Balance b/d
Dr
Yr 9
Cr
Shs
5000
4000
Particulars
GOODWILL ACCOUNT (D)
Shs
Yr 9 Particulars
John
10,000
10,000
10,000
Cr
Rob
16,000
5,000
1,525
Alex
30000
15000
4575
22,525
10,000
49
...
Their Balance Sheet on 3oth June Yr 8 was under:
Assets
Land and Buildings
Office Furniture
Accounts Receivable
Less Provisions
Bills Receivable
Inventories
Bank balance
BALANCE SHEET AS AT 30TH JUNE, Yr 8
Shs
Liabilities
50,000 Kintus Capital
2,000 Muwanga’s Capital
33,000
Accounts Payable
1,000
32,000 General Reserves
6,000
40,000
45,000
175,000
60,000
32,000
75,000
8,000
175,000
Tamale is admitted as a partner on 1st July, Yr 8 and the following arrangements were agreed
upon: i
...
20000/= as his capital and to be entitled to a fifth share in the profit
...
The goodwill of the firm was valued at Shs
...
Tamale was to bring half of his share
of goodwill in cash and the other ½ was to be purchased by him from the existing partners
by book adjustments
...
No
goodwill account is to be raised in the books of the firm
...
The value of stock and furniture was to be reduced by 10% and the Reserve for Doubtful
Debts was to be brought up to ten per cent of the Debtors
...
The value of Land and Buildings was to be increased by 15%
...
The capitals of the partners in the new firm are to be in the profit sharing ratios
...
Required:
a)
Journal entries in the books to give effect to the above
...
c)
Opening balance sheet of the firm
...
b/d
P/ L Adj
...
Shs
14,250
16,750
39,000
70,000
Cr
Shs
5,000
5,000
Opening Balance Sheet of Kintu, Muwanga And Tamale As on 1-7-68
Liabilities
Shs
Assets
Shs
Capital Accounts
Land and buildings
57,500
Kintu
60,000
Office furniture
1,800
Muwanga
20,000
Debtors
33,000
Tamale
20,000 100,000
Less reserve
3,300
29,700
Bills receivable
6,000
Creditors
75,000 Stock in trade
36,000
Tamale’s current a/c
5,000
Cash at bank
39,000
175,000
175,000
Treatment of Reserve Created out of profits:
Reserves existing at the time of the admission of a new partner should always be
transferred to the capital or current account of the old partners in their old profit-sharing
proportions
...
Capitals of partners to be proportionate to new profit sharing ratio: It is often agreed on
admission of a new partner that the capital of all partners should be in proportion to their
respective shares in the profit
...
If the new partner’s capital is
given, it is easy to find the total capital on the basis of his share
...
Excess of capital should be transferred to partner’s current
account or paid in cash
...
The total assets of the firm do not change
...
1
...
4
Dissolution of a Partnership
Time comes when a partnership may have to be dissolved
...
The accounting treatment of the event of a partnership is as follows:
Take note:
The basic skill
attained in dissolving a partnership is fundamental to
appreciating how to undertake all other liquidation, mergers, acquisitions,
take over of enterprises
...
You will use his account close down all assets and
liabilities except cash and bank account
...
Step II: transfer al the assets (except Cash account and or bank account) Realization Account
...
Dr
Realization Account
Cr Sundry Assets Accounts
XX
XX
Step III: Where a Partner takes up an asset, this should be charged upon the Partners capital
account at an agreed value
...
This
will close down all liabilities accounts
...
Dr
The liability Account
XX
Cr the Partners Capital Account
XX
Step VI: where reserves are in existence, transfer all the reserves to the partners capital account
Ian the old profit and loss sharing ratios
...
Step VII: close the Realisation Account to the partners Capital Accounts in their profit and Loss
sharing Ratios
...
Dr
Partners Capital Accounts (in their profit and loss sharing ratios)
Cr
Cash Accounts
Take note:
1
...
when any one partner is insolvent (Case of Garner and Murray);
3
...
Illustration I - When there is a loss on realization of assets
A and B were in partnership sharing profits and losses in proportion of ¾ and ¼
...
The assets realized Shs
...
The liabilities
were as follows:16
Sundry creditors
Loan from ‘A’
A’s capital
B’s capital
Shs 45,000
Shs 20,000
Shs 10,000
Shs 15,000
Required
Show by means of Accounts how the cash realized should be distributed
...
e,
Sundry creditors
Loan from ‘A’
Capital
45,000
20,000
25,000
90,000
Illustration 2 – Assignment 1
Patel and Mehta agree to dissolve their partnership on 31st December Year 7 on which date their
balance sheet was as follows: Liabilities
BALANCE SHEET AS AT 31ST DECEMBER, YEAR 7
Shs
Assets
Sundry Creditors
Patel’s Loan Account
Capital Accounts:
Patel
Mehta
6,000 Cash
8,000 Sundry Debtors
Stock
20,000 Plant and fixtures
10,000 Goodwill
44,000
(i)
(ii)
(iii)
Shs
1,000
5,000
20,000
14,000
4,000
44,000
The partner share profits and loses in proportion to their capitals
...
4,200/= stock Shs 1,800/=
...
The creditors were paid off at a discount of 5%
...
Illustration 3 – Loss on Realization
When on dissolution there a loss on realization of the assets, causing one partners capital
account in debit, which amount he pays into the firms account in cash
17
Jalang’o and Kavuma are in Partnership, with capital of shs 7,000/= and Shs 1,000/=
respectively
...
The assets realized Shs 19,000/= partners share
profits and losses equally
...
Illustration: 4 - Insolvency of Partners – Gamer vs
...
On 31 st December Year 7,
the following was the balance Sheet of the firm and it was decided to dissolve the partnership on
that day
...
The goodwill of the firm was valued at Shs 6000/=
...
Gradual Realization and Piecemeal Distribution upon Dissolution
In real life, partnerships are not sold once and cash realised immediately as we have
illustrated above
...
Besides the buyers will take some more time to remit the purchase price
...
In this scenario, a
piecemeal realisation account or schedule is necessary to keep track of the payment received and
the disbursement plan
...
This amount is paid proportionately to all
18
partners who loaned the firm money, if the amount is not sufficient to cover all partners loan
repayment
...
This amount is
paid proportionately on the basis of their profit and loss sharing ratios
...
Illustration: 6
The following is the Balance Sheet of M/s Kihara, Githu and Ojuku who share profits and losses
2/5, 2/5 and 1/5 respectively
...
Required:
Show the accounts and how each instalment is to be distributed
...
4
...
Essentially these two people merge all their assets
and liabilities and they start operating as single entity sharing all their burdens and pleasures
...
None is perceived to be superior or inferior to the other, yet each is inferior to the other, because
each one finds value in the other; i
...
they complement one other
...
The above analogy illustrates business amalgamation very well where two or more
business entities decide to merge/amalgamate as equals yet each finding value in the other
...
In this section we shall examine the
19
accounting implementation of partnerships merging/amalgamating together and use the term
“Amalgamation”
...
Step I: a Revaluation Account is opened
...
This process involves the following accounting treatment:
a)
When there is appreciation of value in an assets, the difference in appreciation is (New
value – the old Value) is transferred to the Revaluation Account
...
Dr
c)
Revaluation Account
Cr The relevant Asset Account (with decrease)
XX
XX
When there is an appreciation in the value of a liability, this means that the firm’s
liability has increased, and the increase in the liability is debited to the Revaluation
account as the liability account is increased to the new value
...
Dr
f)
Partners Capital Account
Cr
Realisation Account
XX
XX
Where a partner has taken up a liability, charge the agreed value against the partner’s
capital account
...
Dr Partners Capital Account
Cr Sundry Assets Accounts
h)
XX
XX
In case of reserves and any other un-distributable profits, this shall be transferred to the
partner’s capital accounts:
Dr
Dr
h)
Reserves Account
Profit and Loss Account
Cr
Partners Capital Account
XX
XX
XX
The revaluation account shall then be closed down to the individual partner’s accounts
...
Where the revaluation yields a gain, the gain shall be
shared amongst the shareholders n their profit and loss sharing ratios,
Dr
i)
Revaluation Account
Cr
Partners Capital Accounts
XX
XX
Where the revaluation may yield a loss on the partners, then share the loss to all partners
in their profit and loss sharing ratios,
Dr
j)
Partners Capital Accounts
Cr
Revaluation Account
XX
XX
Each firm is expected to asses its net worth fairly
...
Therefore goodwill
should be assessed
...
21
l)
All assets taken over are then transferred to the New Firm’s Amalgamation Account,
Dr
New Firm Amalgamation Account
Cr
Sundry Assets Accounts
XX
XX
It should be noted that the assets are being transferred at their new values
...
Step II: The old firms’ accounts shall be closed down to the New Firm’s Amalgamation Account
as explained above
...
Illustration:
The balance sheets below are for two firms, Kogi & Jiwani Partners and Kintu &
Musoke Partners as on 31st December Year 7 respectively
...
The two firms decided to amalgamate on 1st January Year 8 under the
following terms: (i) That Ochieng’s Loan shall be repaid in full
...
(iii) Goodwill of M/s Kogi and
Jiwani was to be fixed at Shs 8,000 and that of M/s Kintu and Musoke to be fixed at Shs 10,000
...
(v) The inventory of M/s Kogi & Jiwani was found
overvalued by Shs 4,000 while M/s Kintu & Musoke’s inventory had been undervalued by Shs
2,000
...
(vi) The new firm’s total capital was to be Shs 80,000 distributed on the basis of 3:2:3:2
...
The new firm shall would be called:
(Kogi, Jiwani, Kintu and Musoke Amalgamate Partners)
...
b) Pass necessary journal entries to open the books of the new firm
...
Suggested Solution
JOURNAL ENTRIES IN THE BOOKS OF THE FIRM
Date
Yr 8
Jan 1
Jan 1
Jan 1
Jan 1
Jan 1
Jan 1
Jan 1
Particulars
M/s Kogi and Jiwani Partners Books
Goodwill A/c
Dr
Kogi’s Capital A/c
Jiwani’s Capital A/c
(Being goodwill raised on M/s Kogi and Jiwani Partnership)
Ochieng’s Loan Account
Dr
Bank A/c
(Being Ochieng’s Loan repaid in full
...
000
2,000
1,000
1,000
1,000
500
500
62,000
10,000
5,000
20,000
20,300
6,700
1,000
25
Accounts Payable
Capital A/cs
Kintu
Musoke
KoJiKiMu Amalgam
(Being Closure of Liability accounts into the new
Amalgamation account)
Dr
25,000
Dr
Dr
22,000
14,000
Bank A/c
Shs
6,700
Balance b/d
62,000
Shs
Revaluation A/c: Kintu and Musoke Partners
Shs
Provision for Bad Debts
1,000 Inventory
Partners’ Capital A/cs:
Kintu
500
Musoke
500
2,000
M/s Kintu & Musoke Partners Capital Accounts
Kintu Musoke
Liabilities
Kintu
Shs
Shs
Shs
Investment A/c
7
...
Activity:
In a horizontal form, provide an opening balance sheet for the joint firms
...
4
...
The partnership in
whichever case is dissolved
...
The company pays the price in form of shares, debenture stocks and cash to the
partnership’s partners
...
Any balance in
the capital accounts will be paid in cash to respective partners
...
They decided to sell off their business to JK Ltd
...
Took over the furniture, stock and plant and Machinery at Shs 100,000 payable in
fully paid up shares of Shs 10/= each
...
In January, Yr 4, the company collected Shs 23,000 from the form’s accounts receivables
in full settlement, and paid Shs 18,500 to the firm’s accounts payables in full satisfaction of their
claims
...
Required:
Close the books of the firm, and, provide the opening balance sheet of the company
...
Ltd
...
K
...
2,000
Shs
20,000
100,000
3,440
2,000
27
M
Shs
Partners’ Capital A/c
N
O Assets
Shs
Shs
500
500
2,000
Cash A/c
Shs Assets
Inventory
Revaluation A/c: Kintu and Musoke Partners
Shs Assets
Provision for Bad Debts
1,000 Inventory
Partners’ Capital A/cs:
Kintu
500
Musoke
500
2,000
Revaluation A/c: Kintu and Musoke Partners
Shs Assets
Provision for Bad Debts
1,000 Inventory
Partners’ Capital A/cs:
Kintu
500
Musoke
500
2,000
M
Shs
N
Shs
O
Shs
2,000
Shs
Shs
2,000
2,000
Shs
2,000
2,000
General background
The circumstance whereby one business gains control of the one or more other businesses
is fairly common
...
28
Combination pattern range from the horizontal combination of businesses of similar
nature for purposes of securing economies of scale and of reducing competition to the vertical
combination-a line combination from producer to the retailer – aimed at securing the benefits of
rationalization
...
The usual reason for this is to spread risk
...
Different authors use different
labels to describe identical circumstances
...
In particular, in
the context of corporate bodies, the terms acquisitions and mergers have specific meanings and
implications
...
Absoption
This applies when a relatively large , dominanant, business acquire the assets and posibly
liabiities of the other more existing business, which are he n wound up
...
The acquisition of a controlling interest can also arise without
the establishment of a holding company for the purpose, when an existing dominant company
acquires a controlling interest in one or more other companies
...
Takeover
Takeover can be applied to an amalgamation, an acquisition, a merger or acquisition of
controlling of interest
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Case A: Amalgamation and Absorption
In the accounts of the companies being wound up under an amalgamation or absorption scheme,
the following entries are necessary;
a) When asses are taken over at Book value
Dr
Realization account
Cr
...
Bank/Cash Account
XX
c) When Liabilities are taken Over
Dr
Individual Liabilities Account
Cr
Realization Account
XX
d) When Purchase consideration is agreed upon
Dr
New Company’s account
Cr
...
Individual shareholders capital account
XX
f) When discount is received from creditors
Dr
Creditors
Cr
...
Sundry Shareholders capital Account
XX
j) When distributing purchase consideration to shareholders or partners or sole proprietors
Dr
Sundry shareholders capital accounts
XX
Cr
...
and/or shares in the new company
XX
Cr
And/or Debentures in the new company
XX
k) When settling creditors liabilities
Dr
Creditors account
Cr
Bank account
XX
XX
When a company is in process of being liquidated a number of other accounts, additional to
those shown above would need to be prepared
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The following entries would
be relevant:
l) When there is profit on realization
Dr
Realization Account
Cr
...
31
Please take note:
1
...
2
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ASSIGMENT TWO
K, M and B carry on business in partnership sharing profits and losses ½ 3/8, and 1/8
respectively
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Their balance Sheet on that date was as under; (BMK (K) Ltd)
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The company paid Shs 33,500 in
fully paid shares of Shs 10/= each and the balance in cash
...
Required:
Prepare the ledger accounts in the books of the firm