Interest must be calculated and recorded at the following rates at the end of each financial period. Interest is processed through the Partner’s current account. Interest needs to be taken into account as follows; (Show all workings. Round of all calculations to the nearest Rand):
- Interest on the Partners’ capital accounts must be calculated at 15% per year;
- Interest on Current accounts must be provided at 5% per year on the opening balances.
- Interest of 5% is charged on the closing balances of the Drawings; General accounts.
- In terms of the partnership agreement Peter is entitled to a salary of R8 000 per month and Pan is entitled to a salary of R4 500 per month to be appropriated from profits.
- The partners share profits and losses in the ratio of capitals contributed at the end of business on the first day of the financial year.