Accounting – 6.4 Interested parties | e-Consult
6.4 Interested parties (1 questions)
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Answer 3:
a) Change in Capital Calculation:
- Alice: £25,000 (Closing Capital) - £20,000 (Opening Capital) = £5,000
- Bob: £17,000 (Closing Capital) - £15,000 (Opening Capital) = £2,000
b) Financial Performance of the Partnership: The statement of capital shows the changes in the partners' individual capital accounts during the year. An increase in capital indicates that the partner has benefited from the partnership's profits, while a decrease indicates that the partner has drawn money out of the business or suffered a loss. In this case, both partners experienced an increase in their capital, indicating that the partnership made a profit of £7,000 (£5,000 + £2,000).