hey guys Chris from adaptation here and in this video I'm going to show you the solution for question four on the Jan 2023 Pua episode 2. if you want to check out the solution so the other questions on this paper I'm going to put a card there and the link in the description below so be sure to check those out as well and with that said let's get into the question so it reads Timmy and gooty are in Partnership sharing profits and losses in accordance with their partnership agreement which states the following one interest on capital is another six percent final two goodies to be paid a salary of 75 000 three interest is to be charged on each partner's total drawings for the year at three percent per annum right number four Timmy and good you share the balance of profits and losses in a ratio of three to two respected okay before we go any further if you need to check out how to do a partnership appropriation account I'm going to put a card on there and a link in the description below so if you're not sure how to do Partnerships check that out and come back here if however you feel confident in your partnership approve creation affordability let's proceed so some more information balances on the partner's current Accounts at 1 Jan 2022 Timmy credit 14 000 guilty debit 5000. so current accounts are accounts that holds the earnings and withdrawals details of departments right we don't put them in the capital accounts unless specifically stated generally speaking we use current accounts credit balances show that you've earned more than you've withdrawn so you have a surplus on your current account debit balances sure that you've withdrawn more than you've earned which means you have a deficit sorry on your current account now it balances on the partners capital accounts at one Jan 2022 to me 90 30 60 okay and partners drawings for the year ended 31st December 2022 2500 to 600 and the net income for the year ended 31 December 2022 was 1 56 757 cool let's take a look and see what they wanted us to do so it says to prepare the appropriation account for the partnership for the year ending 31st December 2022 this is the format let's go back up to the question and get started now okay so be sure to head out name of the partnership naming the statement and the period to which it applies so we start off with our net income for the year ended 31 December 2022 which is 156 757 and to which we add the interest on drawings now item 3 says interest is to be charged on each partner's total drawings of the year at three percent per hour so let's go down to the Department's drawings Timmy had 2500 gertia 56 so all we do is multiply three percent by each of those get the figures the individual figures add them together and add that to the net income and that would be the profit and everything else that we are now going to appropriate so we've got less Appropriations now there's no one right way to do this I said there's no specific order you can put the salary first you can put the original capital first but the share of remaining profit must go last all right so I like to show my interest on Capital Fields so I'm going to put that so it says interest on capital is a lot of six percent for Adam if we go down to the balances on the partners capital accounts Timmy has 90 000 UTS 60 000. so we find six percent of ninety for Timmy six percent of 60 for beauty 5400 respectively totaling nine thousand now only Gucci gets a salary of seventy five thousand per Anno we add that here and we get eighty four thousand as a total appropriation which is then subtracted from the 157 and that gives us the profit after appropriation which we then share between your partners in one ratio item four tools the share the balance of profits and losses in Euros three to two respectively what do we do with the three to two ratio we add three and two together and get five and then put each of these numbers over that five like a common denominator so it's a three-fifths two-fifth split two Timmy and Gertie respectively so when you find three-fifths of the 73 you get forty three eight two fifths of the seventy three gives us twenty nine two double adding that back gives us back 73 which means we have given the partners all of the profits shared it out or appropriated it appropriately okay that's it for part A let's take a look at Part B okay sorry I meant to say a part two so it says prepare Gertie's current account using the information on page 18 and ants and your answer on page 19. balance the account at the end of the year so give a nice little format here now honestly I feel it's kind of lazy to do one account so I did both for Timmy and for goody just give me one sec let me pull back up the information and we'll go from there okay so again I know that they've said only guilty I'm going to tell me just for the sake of practice right so Timmy had an opening balance of 14 000 on the credit side we're gonna put that there now again the partners current accounts holds all of their earnings which we just which we just saw in the appropriation account and withdrawals which is drawings and interest on drawings so let's put those items in first let's put the withdrawals and food so the drawings according to the question Timmy had 2500 address we're going to put that there the angelson draws us three percent of that which is 75 right now let's pull up the appropriation account and we'll see that um Timmy made some earnings right so the interest on Capital the share of profits right so that's it so now what we have to do is balance off this um which I'm gonna call it uh current account right so we're going to add up that side you get 63 too which is clearly more than the debit side so it has the total the same so it'll take 63 too and minus it total here that'll be a very balanced carry down which is sixty thousand six twenty five sorry and it's brought on the credit side right so again that's just a little extra practice let's take a look at guilty's current account number so goodies open in balance is only debit side which means Beauty had a deficit to start with right now goodies withdrawals the drawings was 5600 right so we're gonna put that in right here the interest was three percent of that which was 168 and beauty is earning so if Beauty had um interest on Capital salary and share profit now when you add up this that you're gonna get more than a hundred thousand definitely right this side is only about ten Thousand Seven sixty eight so that side's total is 107.8 I should decide me and when you find the difference between both sides you're getting 97 or 32 which is the balance on goodies card account right there's one more part of this question let's get another way and call it Junction right so B part one state two components which Timmy and Gertie could have included in their partnership agreement in addition to the profit sharing ratio um I'm just going to put up a list here of several items that you could you could use name of the partnership name of the partners titles and responsibilities of each partner types of permissible business activities what they're allowed to do what they're not allowed to do the amount and timing of fixed Capital commitments or contributions by each partner how much money they're going to put in on when rate of interest rate of interest on drawings salaries whether drugs is allowed and if there are any limits right procedures for admitting a partner for retirement of a partner for dismissing a part right and yeah the last item here was State one reason why 10 million guilty this is the mobile partnership so I'll give you four right so when you have more than one person you have access to a larger Capital base because two people will have more money than one they'll have access to a wider variety of skills right um so yeah so Timmy might know some stuff that beauty doesn't know and vice versa to have access to a wider deeper knowledge base again to remind most of the good thing like no advice from yourself and to be able to divide the labor and specialize right so that's about it for this question all right guys so there you have it that's a solution for question four in the Jan 2023 POA number two if you have any further questions about the solution please feel free to leave them in the comments section below and I'll get back to you when I have a chance if you want to check any more videos I'm going to put some cards up here don't forget to subscribe and be sure to check out my website where I find some free interesting field animals anyway guys that's the usual thank you so much for watching take care of yourselves and I'll see you next time bye