Question

1. Mathew and Henry are in partnership sharing profits and losses in the ratio 1:1. Henry enjoys a salary of sh 5,000 per year. The net profit for the year ended 32 Dec 2010 and 2011 were sh 12,000 and sh 9,000 respectively.

Required:

Prepare the appropriation of profit and loss for these two years separately.

Describe five differences of receipts and payments A/C and Income and Expenditure A/C.

Answer 1

1

Appropriation of profit for the year 2010

	Mathew	Henry
Salary	0	5,000
Share of profit	3,500	3,500
Total	3,500	8,500

Appropriation of profit for the year 2011

	Mathew	Henry
Salary	0	5,000
Share of profit	2,000	2,000
Total	2,000	7,000

2.

Difference between receipts and payments A/C and Income and Expenditure A/C

i) Receipt and payment account is prepared on cash basis while Income and expenditure account is prepared on accrual basis.

ii) Receipts and payment account has beginning and ending balances of cash while income and expenditure account does not have cash balances.

iii) Income and expenditure account shows surplus or deficit while Receipts and payment account does not show surplus or deficit.

iv) Receipts and payment account has items of both revenue and capital nature while Income and expenditure account has items of revenue nature only.