Jack and Diane, the only two partners in a firm, invested capital of £20,000 and £30,000 respectively and agreed their entitlements to be:
- Jack = Annual salary £18,000; Interest on capital (per annum) 10%; Share of remaining profit or loss 40%
- Diane = Annual salary £22,000; Interest on capital (per annum) 10%; Share of remaining profit or loss 60%
If the profit for the year was £40,000, what share would be debited / credited to Diane’s current account?
Select ONE answer:
- Nil
- £3,000 Debit
- £22,000 Credit
- £24,000 Credit
Show your workings to arrive at your answer, and explain and justify your reasons:
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This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 2
- Not correct
- Correct
– Profit for the year: £40,000
– Jack & Diane
– Salary: £ 18,000 & £22,000 = £40,000
– Interest on capital (10%): £2,000 & 3,000 = £5,000
– Loss to be shared: -£5,000
– Share of loss (40% : 60%) -£2,000 & -£3,000 = £5,000 - Not correct
- Not correct
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