Do not close the books of the firm nor draw up the formal statements.

Be content for this assignment with the making of the work sheet.

Close the work sheet as usual by the transfer of the net profit from the Profit and Loss columns to the credit column of the balance sheet.

Immediately following and on the same page with the work sheet, provide for showing the distribution of profits and interest and salary adjustments. The following illustration will indicate how this may be done.

ITEMS PROFIT & LOSS  X PER 36%   Y PER 44%   Z PER 20% 
Net Profit as above $18,364
Salary Allowances$ 5,400 $2,400 $3,000
Partners’ Drawings $3,000 $3,100 $1,500
Interest on Excess Drawings 36 18 3 15
Interest on Capitals3,000 900 600 $1,500
Balance Distributed in
 Profit and Loss ratio		10,000 3,600 4,400 2,000
Balance of Personal accounts
 to Loan accounts		 3,882 4,897 1,985
$18,400 $18,400 $6,900$6,900 $8,000$8,000 $3,500$3,500

The item “Net Profit as above” is taken from the work sheet. The Profit and Loss columns, in conjunction with the detailed distributions shown in the “Partners’ Personal” columns, contain all the data needed for the appropriation section of the profit and loss statement and also for distributing the net profit shown by the Profit and Loss account. By entering the drawings in the “Partners’ Personal” columns, those columns are made to develop the amount of undrawn profits of each partner. They thus contain the same information which the respective personal accounts will contain after the ledger is closed. The work sheet, with this appended analysis of profits and partners’ personal accounts, thus contains all of the information needed both for drawing up the formal statements and for adjusting and closing the books.

XVI

Draw up a pro forma balance sheet and a statement of profit and loss for the six months for Cotten, Wooster & Company. In drawing up the balance sheet, head it as follows:

Exhibit A

Cotten, Wooster & Company
Balance Sheet
June 30, 19—