Accounting Group Project - PARTNERSHIPS & BUDGETS
You will create a fictional partnership business and compile an integrated set of budgets for your business.
PART A - Formation of a Partnership
Required:
1. You are to create a fictional partnership business with your group members. The story is to be made up entirely by YOU. You must introduce your business and your partners - your group members with the following required information other than your own ideas:
The business' name, trading address & contact details;
Nature of the business. What does your business do? Please write a detailed description of your business;
Have you a business' plan?
What is the level of competition is like for you to enter the market?
What is your business' projection for the future?
Partners' backgrounds, educations, experiences, expertise & qualifications;
All group members must be the partners of your business. If your group has 5 members, you must include 4 group members as partners in Part A and admit the remaining group member as the New Partner in Part C.
Detail each partners' contributions using a table to be made up by YOU; Each partner must contribute other Assets including Cash (eg. Equipment, Inventories, Prepaid Insurance, etc...)
When does the business commence? (The date should be at the beginning of January, or March, or July, or September)
2. Record Journal Entries for the partner's contribution using a table for the Journal;
3. Prepare a Balance Sheet upon the Formation of the Partnership to include Partners' assets, liabilities & equities as per their contribution. The date should be the end of the month.
4. Partnership Agreement.
You may use any appropriate online template, which can be downloaded from a Google search. So long as you reference this, you may adapt an online template as your business' Partnership Agreement with variations of your partners' names and different $ amounts for the partners' contribution. This will save you time instead of writing the partnership agreement from scratch.
PART B - Operation of a Partnership
REQUIRED:
1. Write a summary describing your business operation since formation and commencement of your business including the following:(YOU must make up the $ amount, where appropriate)
How long has your business been in operation?
What is the profit / loss sharing ratio of the Partnership?
Does your business make a profit or Loss? How much?
The Partnership Agreement provides for the following:
- Capital Accounts are Fixed;
- Profits / Losses to be allocated to Current Accounts;
- Interest on fixed Capital at 5% per annum;
- Interest on Drawings at 20% per annum;
- Interest on loans by partners, to the partnership, to be credited at 6%;
- Partners'salaries.
2. Prepare Journal Entries for the relevant above transactions;
3. Prepare the Profit & Loss Appropriation account for the year;
4. Prepare Trial Balance to reflect both Part A& B.The Trial Balance is to include Partners' contributions such as assets, liabilities and equities from Part A. The Trial Balance also has income and expenses from the business' operation in Part B.
YOU must make up all the accounts and the $ amounts for the accounts. You will create the account names, which are based on the nature of your business.
PART C - Introduction of a New Partner
REQUIRED:
1. YOU are to create a story for the admission of a NEW Partner into your business using the following information:
What are the reasons for the admission of a new partner?
Describe the New Partner's background, experience and expertise, etc...
What does the New Partner contribute into the business?
What is the Date of Admission?
What is the new profit / loss sharing ratio for the partners?
2. Record Journal Entry for the admission of the New Partner;
3. Prepare Balance Sheet after the admission of the New Partner to reflect the capital contribution of the New Partner and the assets and liabilities of the existing Partners.
PART D - Budgets For Your Business
To complete the budgets for Your Business from 1 January to 31 March 2018, you are required to prepare the following:
1. A Cash Budget from 1 January to 31 March 2018;
2. A Budgeted Income Statement from 1 January to 31 March 2018;
3. A Budgeted Balance Sheet as at 31 March 2018.
The above should be prepared using a template, which is provided on WIN Learning. Each Part should be on a separate tab using Microsoft Excel.
You will need to make up sales figures for the months that are provided in the table below:
EXAMPLES:
|
Budgeted Sales
|
Actual Sales
|
Credit Sales
|
|
February
|
March
|
January
|
February
|
March
|
January
|
February
|
March
|
|
45,000
|
50,000
|
55,000
|
60,000
|
70,000
|
31,500
|
35,000
|
38,500
|
The Budgets must also contain the following datas:
1. 60% of all sales are on credit.
2. Estimated collections from debtors are:
- 70% are collected in the month of sale
- 20% are collected in the month following sale
- 10% are collected in the second month after sale.
3. Cash sales attract a cash discount of 3%.
4. Credit purchases of merchandise in any given month are, on average, 80% of estimated sales for that particular month.
5. Estimated payments of purchases are:
- 75% of purchases are paid in the month of acquisition (less 2% discount)
- 25% of purchases are paid in the following month.
You are required to estimate:
1. Inventory as at 31 March;
2. Administrative and general expenses including:
a. Depreciation expense
b. Interest repayments on loan
3. All operating expenses are paid in the month they are incurred.
4. Other items if necessary to complete the required Budgets.
Ignore GST.