Kalebu, Wekesa and Babu are in partnership trading as Kaweba Traders and sharing profit and loss equally.
The partners have presented the following statement of profit and loss for the year ended 31 December 2021:
| Sh. | Sh. |
| Sales | | 17,940,000 |
| Opening stock | 1,245,000 | |
| Purchases | 9,887,000 | |
| Closing stock | (2,162,000) | (8,970,000) |
| Gross profit | | 8,970,000 |
| Profit on sale of furniture | | 1,359,300 |
| Insurance compensation for stolen car | | 713,000 |
| Discount received | | 382,100 |
| Farming income | | 192,050 |
| Dividend income (net) | | 517,500 |
| | 12,133,950 |
| Less Expenses: | | |
| Mortgage interest | 552,000 | |
| Furniture at cost | 138,000 | |
| Depreciation | 529,000 | |
| General expenses | 3,243,000 | |
| Salaries and wages | 4,357,000 | |
| Custom duty | 209,300 | |
| Conveyance fee | 195,500 | |
| Legal expenses | 1,867,500 | |
| Repair and maintenance | 2,070,000 | |
| Value Added Tax (VAT) paid | 94,300
| |
| Interest on capital | 959,100 | |
| Bank charges | 138,000 | |
| Rent and rates | 377,200 | |
| Auditing and accountancy fees | 529,000 | |
| Motor vehicle expenses | 486,220 | |
| Insurance premiums | 441,600 | (16,186,720) |
| Net loss | | (4,052,770) |
Additional information:
| 1 | Mortgage interest related to a partners residential house. |
| 2 | Insurance premiums include Sh.259,900 paid to insure Wekesa's private car. |
| 3 | The investment allowances were agreed with the revenue authority at Sh.1,357,000 during the year ended 31 December 2021. |
| 4 | The partners took goods for personal use which have recorded as sales which had a cost price of Sh.207,000. The gross profit margin was 20%. |
5
| Salaries and wages included: | Sh. |
| Kalebu | 1,035,000 |
| Wekesa | 1,380,000 |
| Babu | 1,150,000 |
6 |
Interest on capital comprised: |
Sh. |
| Kalebu | 374,900 |
| Wekesa | 170,200 |
| Babu | 414,000 |
7 |
Legal fees included: |
Sh. |
| Preparation of tender document | 287,500 |
| Parking fines paid to county government | 138,000 |
| Court charges for breach of contract | 368,000 |
| Appeal against tax assessment | 75,000 |
| Defending a partner in a local committee | 216,200
|
8
|
General expenses included:
|
Sh.
|
| Embezzlement by cashier | 678,000 |
| Registration of trademark | 337,500 |
| Office partition | 510,000 |
| Directors' christmas party | 575,000 |
9
|
Repairs and maintenance comprised of:
|
Sh.
|
| New office tables | 280,000 |
| Laptops and computers | 430,000 |
| Fixing broken chairs and tables | 116,000 |
Required:
(i) Adjusted partnership statement of profit and loss for the year ended 31 December 2021.
(ii) The allocation of profit or loss computed in (c) (i) above to each partner.
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