QUESTION THREE [30]

1. Tasneem and Nazreen were friends with similar hobbies. They formed a partnership with a written partnership agreement to trade in pastry and related products as

Tasnazs Pastry. The following were extracted from their accounting records;

Balances in the ledger at 30 June 2021	R
Capital : Tas	407 000
Capital : Naz	363 000
Current account: Tas credit balance at 1 July 2020	8 052
Current account: Naz: debit balance at 1 July 2020	2 640
Drawings : Tas	88 000
Drawings : Naz	140 800
Profit for the year	438 636

Additional Information:

The partnership agreement provides for the following that needs to be taken into account:

1. Partners are entitled to salaries as follows:
   • Tas R8 000 per month,
   • Naz R10 000 per month.

2. Interest on capital accounts are allowed at 12% per year on each partners capital on a pro-rata basis. Note the following that on 1 January 2021:
   • Tas decreased her capital account by R27 000; and
   • Naz increase her capital account by R17 000.

3. Interest at 10% per year is applicable to the opening balance of each partners current account.

4. Naz is entitled to an annual bonus equal to 2% of the profit for the year before any appropriation from the profit for the year.

5. The remaining profits or losses are shared equally.

Required:

Prepare the statement of changes in equity for Tasnazs Pastry for the year ended 30 June 2021. You may eliminate the Total column but must include an appropriation column. Show all workings. Round off all calculations to the nearest Rand.

(20)

Use the following format:

Statement of changes in equity

Capital accounts:
Balance at
Balance at

Current accounts:			Appropriation
Balance at
Appropriations:
Balance at

Discuss the advantages and disadvantages of forming a partnership as opposed to a sole proprietor.