Leo, Kesho and Kutwa trade in electrical goods and as partners in Leo Unincorporated.  They share profits and losses equally.  The following details in the draft accounts regarding their profit and loss status as at 31 December 2020 have been provided:     Debits Sh.   Credits Sh. Office expenses General expenses Salaries and wages Show room expenses Rents, rates and taxes Printing and stationery Instalment tax paid Advertising Legal charges Interest on capital Depreciation Bad debts Commission to partners Donation for poverty Property taxes Electricity expenses General reserve 408,000 188,000 560,000 234,000 300,000 128,000   90,000 146,000 164,000 420,000 184,000 136,000 160,000 200,000   24,000   92,000 240,000 Gross profit Interest earned Discounts received Other receipts Rent income Capital gain on shares. 2,600,000    240,000    160,000    300,000    264,000    200,000   The partners provided additional information as follows:   1.          Closing stock had been understated by Sh.30, 000 as at 31 December 2019. 2.          Leo was paid Sh.100, 000 as salary (included in salaries and wages) and PAYE Sh.31,000 was paid on it. 3.          The firm was fined Sh.30, 000 for breach of regulations.  This is included in legal charges. 4.          Interest on capital was Sh.160, 000 to Leo, Sh.120, 000 to Kesho and sh.140, 000 to Kutwa. 5.          Commission to partners include sh.90, 000 to Leo and the balance to Kutwa. 6.          Capital allowances had been agreed at sh.1, 800,000 with the tax authorities. Compute the total income (loss) from the partnership business as at 31st December 2020.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Leo, Kesho and Kutwa trade in electrical goods and as partners in Leo Unincorporated.  They share profits and losses equally.  The following details in the draft accounts regarding their profit and loss status as at 31 December 2020 have been provided:

 

 

Debits

Sh.

 

Credits

Sh.

Office expenses

General expenses

Salaries and wages

Show room expenses

Rents, rates and taxes

Printing and stationery

Instalment tax paid

Advertising

Legal charges

Interest on capital

Depreciation

Bad debts

Commission to partners

Donation for poverty

Property taxes

Electricity expenses

General reserve

408,000

188,000

560,000

234,000

300,000

128,000

  90,000

146,000

164,000

420,000

184,000

136,000

160,000

200,000

  24,000

  92,000

240,000

Gross profit

Interest earned

Discounts received

Other receipts

Rent income

Capital gain on shares.

2,600,000

   240,000

   160,000

   300,000

   264,000

   200,000

 

The partners provided additional information as follows:

 

1.          Closing stock had been understated by Sh.30, 000 as at 31 December 2019.

2.          Leo was paid Sh.100, 000 as salary (included in salaries and wages) and PAYE Sh.31,000 was paid on it.

3.          The firm was fined Sh.30, 000 for breach of regulations.  This is included in legal charges.

4.          Interest on capital was Sh.160, 000 to Leo, Sh.120, 000 to Kesho and sh.140, 000 to Kutwa.

5.          Commission to partners include sh.90, 000 to Leo and the balance to Kutwa.

6.          Capital allowances had been agreed at sh.1, 800,000 with the tax authorities.

Compute the total income (loss) from the partnership business as at 31st December 2020. 

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