Penrose and Wilcox are in partnership, sharing profits and losses in the ratio 3:2. The following information was taken from their books for the year ending 31 December 2012, before the completion of their profit and loss appropriation account.

(a) Prepare, for the year ending 31 December 2012: (i) the profit and loss appropriation account of Penrose and Wilcox; (ii) the current accounts in the ledger for Penrose and Wilcox.

(b) Why in many partnerships are current accounts prepared as well as capital accounts?

(c) At 1 January 2012 Penrose had a debit balance in his current account. What does this mean?

(d) In partnership accounts what is the purpose of preparing: (i) an income statement? (ii) a profit and loss appropriation account?

(e) In partnership accounts why is: (i) interest allowed on capital? (ii) interest charged on drawings?

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Current accounts (1 January 2012) Drawings Net trading profit Interest on capital Salary Interest on drawings Penrose Wilcox Penrose Wilcox Penrose Wilcox Penrose Penrose Wilcox 640 330 3,000 2,000 6,810 540 720 2,000 270 180 (Dr) (Cr)