Observation

Some of the candidates attempted this scenario questions on document that govern operations of partnership, contents of partnership agreement and types of capital account.  Candidates’ response to Question 3(a) and 3(b) was reasonable but candidates lost more marks in Question 3(c) which was on listing and explanation of capital accounts as most candidates’ could only list.

Below are some of the suggested responses for question 3c were:

1. The document that will govern the operations of the partnership between Kofi and Kojo is Partnership Deed or Partnership Agreement.

(ii) Contents of the Partnership Document includes:

1. The capital to be contributed by each partner;
2. The ratio in which profits or losses are to be shared;
3. The rate of interest if any to be paid on capital;
4. The rate of interest if any to be charged on partners’ drawings;
5. Salaries to be paid to partners if any;
6. Arrangements for the admission of new partners;
7. Procedures to be carried out when a partner resigns, retires or dies;
8. Name of the partnership firm;
9. Address of the partnership firm
10. Signatories to the firm’s bank account;
11. Settlement of trade dispute;
12. Methods of calculating goodwill on amalgamation of partnerships;
13. Limit of drawings allowed to each partner if any;
14. Nature of the partnership business;
15. Duration of the partnership;
16. Names of partners;
17. Addresses of the partners;
18. Rules regarding admission of partners;
19. Restriction of partners if any;
20. Policy on partner’s loans and advances to the firm;
21. Rights or powers of partners;
22. Duties or obligations of partners;
23. Types of accounts to be maintained.
24. Issues relating to the appointment of auditors;
25. Methods of valuing goodwill in the event of retirement, death or admission of another partner;
26. Settlement of accounts in the case of dissolution of the firm;
27. How to settle disputes among partners;
28. Arrangements in case a partner becomes insolvent;
29. Next of kin of partners;
30. Types of capital accounts to be maintained;
31. Policy on withdrawal of capital by partners;
32. Policy on additional capital contribution by partners;
33. Procedure on dissolution of partnership;
34. Names and addresses of the firm’s bankers;
35. Procedure for amalgamation with other entities;
36. Procedure for possible conversion of partnership to companies;
37. Issues relating to the management of the firm;
38. Rules governing the conduct of meetings;
39. Types of partners;
40. Profile of partners;
41. Number of partners.

 

3(b)      The Capital Accounts that the Partners can Maintain in the Partnership are:    
i.Fixed Capital Account;
ii. Fluctuating Capital Account.

Fixed Capital Account:
This is the partners’ capital account which contains:
-the initial capital contribution;
- any additional capital contribution and
- any withdrawal of capital.               
(1 mark for mentioning the type of capital account; 1 mark each for any two contents = 3 marks)

Fluctuating Capital Account:
This is the partners’ capital account that contains:

• the initial capital contribution, any additional capital contribution and any withdrawal of capital and
• all items that may be posted from the profit and loss appropriation account.