ACC1007

Posted: May 5th, 2020

Fundamentals of Accounting 2
Module Code: ACC1007

Date:

Theory/ Practical: Theory

Groups: BSc HTM & FSM

Duration: 3 hours

INSTRUCTIONS:

1. This paper has three (3) pages and two ( 2 ) questions
Section B 1 computational question

2. Attempt both questions

3. To be done individually.

4. Clearly write your name and ID number on your answer sheet

5. Upon completion, responses should be submitted to your respective tutor as follows

ATTEMPT BOTH QUESTIONS

Question One

The following is the draft payroll of the Thunderbolts for February 2022

Elaine Sherica Shelly
INCOME
Basic Pay 95,000 120,000 320,000
Overtime 12,000 0 0
Travelling 0 15,000 20,000
Uniform 10,000 10,000 15,000
Protective Clothing 20,000 0 0
Material Aid & Supplies 5,000 0 0
Commission 0 20,000
Entertainment Allowance 0 0 35,000
GROSS PAY 142,000 165,000 390,000
Total Taxable 3

DEDUCTIONS
NIS 3
NHT 3
EDUCATION TAX 3
INCOME TAX 3
Pension 9,500 12,000 32,000
Union Dues 3,000 3,000 3,000
Health Insurance 3,200 3,200 3,200
Loan Repayment 0 0 60,000
Total Deductions

NET PAY 3

Required

1. Copy and Complete the payroll for the month ( 18 marks )

2. Define the term Statutory Deductions and state its usefulness
to the national economy ( 3 marks )

3. State two advantages to the employer when wages and salaries
are determined by

a. Time Rate
b. Piece Rate ( 4 marks )

Question Two

The following balances were obtained from the books of The Cartwrights as at December 31, 2020 :
DETAILS DR CR
Net Income 135,000
Capital
Adam 250,000
Joe 750,000
Current Account
Adam 40,000
Joe 10,000
Drawings
Adam 60,000
Joe 30,000
Non Current Assets Book Value 1,200,000
Debtors 60,000
Bank 55,500
Loan 400,000
Creditors 30,000
Expense Owing 20,000
Revenue Prepaid 25,000
Closing Stock 285,500
1,675,500 1,675,500

The Articles of Partnership allowed for the following
a. Interest is to be paid on capital at 5% p.a.
b. Interest is to be charged on drawings at 2.5% p.a.
c. Joe is to be paid a salary of $27,250
d. The partners are to share profit in the same ratio as their capital
Required :
1. Prepare the following
– The Appropriation Account ( 7 marks )
– The Current Account ( 11 marks )

2. The Cartwrights brother, Haase, is to be admitted to the
business as both a silent and limited partner.

Briefly explain the characteristics of a partner that is classified as
a. A Silent Partner ( 2 marks )
b. A Limited Partner ( 2 marks )

3. Joe Cartwright has recommended that with the Admission
of Haase as a partner, there should be a revision of the
Articles of Partnership.

Briefly explain the Articles of Partnership and state its
relationship to the Partnership Act ( 3 marks )

END OF TEST

As an AI language model, I am not able to grade or administer tests. However, I can provide guidance on how to approach the questions in Fundamentals of Accounting 2 Test 2.

Question One

To complete the payroll for February 2022, you will need to calculate the deductions for NIS, NHT, Education Tax, and Income Tax for each employee. Then, you will need to subtract the deductions from the gross pay to get the net pay for each employee.

Statutory deductions are mandatory deductions that are taken from an employee’s salary or wages by the employer and paid to the government. They include National Insurance Scheme (NIS), National Housing Trust (NHT), Education Tax, and Income Tax. The purpose of statutory deductions is to provide social security benefits and fund government programs.

The two advantages of determining wages and salaries by time rate and piece rate are as follows:

a. Time Rate: It provides a fixed amount of pay for a specific amount of time. This method can be beneficial for employers who need employees to complete tasks within a set timeframe. It also provides a consistent wage for employees, which can help them with financial planning.

b. Piece Rate: It pays employees based on the number of items they produce or services they provide. This method can motivate employees to work efficiently and produce high-quality work to increase their pay. It can also be useful for employers who want to track productivity and output.

Question Two

To prepare the Appropriation Account, you will need to calculate the interest on capital and drawings for each partner, Joe’s salary, and the net profit for the year. Then, you will need to allocate the net profit to the partners based on their capital ratio and subtract their interest on drawings and add interest on capital. Finally, you will need to transfer the remaining profit to the partners’ current accounts.
To prepare the Current Account, you will need to record the transactions that affected the partners’ current account balance during the year. This includes the interest on capital, interest on drawings, Joe’s salary, and the allocation of profit. You will also need to adjust for any previous balance and transfer the remaining balance to the partners’ capital accounts.

A silent partner is a partner who contributes capital to the business but does not participate in the day-to-day management of the business. A limited partner is a partner who has limited liability and is not involved in the management of the business.

The Articles of Partnership are a legal document that outlines the rights and responsibilities of the partners in a partnership. It includes details such as the capital contributions, profit-sharing ratios, and management responsibilities. The Articles of Partnership must comply with the Partnership Act, which is the law that governs partnerships in Jamaica. If there is a conflict between the Articles of Partnership and the Partnership Act, the Partnership Act takes precedence.